Friday, December 17, 2010

It is now up to the President

Last night while most of us were sleeping, the U.S. House of Representatives passed the "The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010" [hereinafter the "2010 Act"] and sent it off to the President to sign on December 17, 2010. This band aid of legislation is only effective for two years. Yes, we will be right back where we are today looking at $1M dollar estate tax exemptions and a 55% estate tax rate all over again in December 2012! What a way to run a railroad? Assuming that President Obama signs this new law, there are a variety of new provisions which we will have to incorporate into our estate planning practice. Here are a few of the highlights:

1. Estate Tax for 2010: Exclusion Amount $5M with a maximum tax rate of 35% and the option to elect carryover tax basis instead of estate tax treatment. The Gift Tax exclusion amount will remain at $1,000,000 (no change) and at a 35% gift tax rate (no change).

2. Estate Tax for 2011-2012: Exclusion Amount $5M with a maximum estate tax rate of 35%. The Gift Tax exclusion amount will increase to $5M and maintain a rate of 35% (no change).

3. One of the new features is the use of a deceased spouse's exemption amount ("portability") for spouses who die in 2011 and 2012. In essence, married couples will get the use of a $10M exemption under certain circumstances.

There is much to be studied and absorbed from this legislation. We will bring you more details ahead in the coming days.

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