News from the Estate Planning Department

You may or may not be aware that the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 contains several changes that favorably impact estate planning and taxes through 2012. These laws, however, will expire on December 31, 2012, and without further action by Congress, will revert to the laws in effect in 2001, which are much less favorable.

Highlights for 2011 and 2012 are as follows:

  1. The exemption amount increases to $5 million per person for federal gift, estate and generation skipping transfer taxes ($10 million for a married couple);
  2. The top marginal federal gift, estate and generation-skipping transfer tax is reduced from 45% to 35%, and a full “step-up” in basis rule applies for all assets included in a decedent’s gross estate;
  3. “Portability” of unused estate tax exemption in the estate of the first spouse to die, thereby allowing the surviving spouse’s estate to take advantage not only of his or her own exemption but also any unused portion of the exemption of his or her spouse.

Since this Act is only good for 2011 and 2012, if Congress fails to act to extend this law then, on January 1, 2013, the federal gift, estate and generation skipping transfer tax exemptions revert back to $1 million and the top tax rate of 55% returns. Because the Act is only temporary, it is a good idea to review your current estate planning documents to make sure they still accomplish your desired goals. While no changes may be needed for some, for others there may be planning opportunities to take advantage of. If you do not have an estate plan or have not reviewed your current estate plan in at least 5 years, I urge you make an appointment to come to our office for a no-fee consultation.

Whether or not your estate may be subject estate taxes, do not miss out on the opportunity to plan for how and when your assets are distributed upon your death, avoid probate, limit claims of creditors and minimize disputes among family members.

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