The so called “fiscal cliff” bill passed by the House of Representatives on January 1 sets the federal estate and gift tax exemption amount at $5 million for 2013 and thereafter.  If Congress had not taken any action, the exemption amount would have fallen to about $1 million.  The exemption will be adjusted for inflation going forward.

While the federal estate tax rate will increase to 40% from last year’s 35% it appears that “portability” (a surviving spouse’s ability to take advantage of the unused exemption of the deceased spouse) will become permanent.

The federal gift tax can be an important consideration in connection with an asset protection plan, since asset protection planning frequently involves making gifts to family members.