How Does The 2010 Tax Bill Affect Your Estate Plan?
The 2010 Tax Act signed by President Obama on December 17th includes generous increases in the estate and gift exemptions (the amounts that can pass free of estate tax at your death and free of gift tax for lifetime gifts). Both the estate and gift tax exemptions jump to $5 million per person. There’s a new twist: your unused estate exemption is “portable” and can be transferred to your surviving spouse at your death. The Act also gives another significant benefit for long term planning: the exemption from generation skipping transfer (GST) tax increased to $5 million. The Act lowers the maximum rates for estate, gift and GST tax to 35%. These high exemptions and low rates provide a unique opportunity to transfer substantial wealth to children and grandchildren with no gift and generation skipping transfer taxes. These benefits are available only in 2011 and 2012 unless Congress extends them in 2012.
Should you change your estate plan because of the increased estate tax exemption? Maybe not, given the uncertainty as to whether the large exemptions will remain in place. Check with your estate planning attorney about how your plan works with the new exemptions.
Should you consider opportunities to reduce the value of your estate through a gifting program? Yes -- if your estate is worth more than $5 million ($10 million for a married couple), and you are concerned that the generous benefits in the new tax bill may not be extended past 2012.
See full article for a more detailed explanation of the changes to estate, gift and generation skipping transfer taxes, as well new planning opportunities for the estates of individuals who died during 2010.