Estate Taxes: 2011 and beyond

For most of 2010, several of my clients were worried that the estate tax exemption would be set at $1 million dollars with any amount in excess of $1 million being taxed at 55 percent.  Those individuals with even a $2 million dollar estate were faced with the possibility of paying a large tax bill upon their death to the federal government.  During the last few weeks in Congress, some fears have been removed concerning estate taxes while others still remain concerning the health of our economy.   Here is a summary of the actions Congress has taken concerning estate taxes for 2011 and 2012:

Estate and gift taxes. For 2011 and 2012, the top estate-tax rate falls to 35% and the exemption rises to $5 million an individual.

The bill also allows executors of 2010 estates to elect whether to use 2010 rules or 2011 rules. The choice will help heirs who would pay more as a result of the lapse of the estate tax in 2010 and a corresponding rise in capital-gains taxes.

Also for the first time, estate, gift and generation-skipping taxes will be “unified” so that one $5 million exemption per individual applies to all three.

While most of you may think that your estate will never reach $5 million and now may tune out when you hear the phrase estate planning, there are additional concerns for drafting an estate plan even for estates that do not reach the $5 million mark.   Look for my next post in 2011 for practical legal solutions for estates less than $5 million.

I wish everyone good health and prosperity in the new year!

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