Estate Tax Update - Dec 17, 2010

On Friday, December 17, 2010, after much political wrangling, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This law has a major impact on estate and gift tax but for a limited period of 2 years. As we watched this process to unravel, it reaffirmed our belief that is absolutely essential that client's revisit their estate plans with their attorneys and estate planners to keep informed of any changes in the law that might have an impact on themselves and their families. By signing this new law into legislation, the following changes are now in effect for the next 2 years:

  • The federal estate tax exemption or the amount of assets you can leave to your beneficiaries is $5,000,000 and $10,000,000 for a married couple. The tax rate for the assets in excess of that is 35%. While there is no estate tax imposed on the death of the first spouse, these exemptions apply if the beneficiary is a non-spouse. It is critical to recognize, however, that New York State tax exemption remains at $1,000,000.


  • Estate tax and gift tax are now once again unified which means a person can make a gift of $5,000,000 over the course of their lifetime and without having to pay tax. It also continues to be the annual exclusion of $13,000 per person per year which does not risk the $5,000,000 gift tax exemption.

  • It is important to note that this Act only applies for the next 2 years unless congress and the President extend it and/or modify it in some fashion. Without such modification or extension, the federal exemption or the amount you can leave to non-spouse assets will be reduced dramatically to $1,000,000 on the federal level with a maximum tax rate, believe it or not, of 55%.

As a result of these significant changes, you and your advisors should consider whether or not you can take advantage of this new law to preserve and protect your hard earned assets for you and your family and keeping the government from taxing your assets when you pass.

If you wish to receive a free consultation regarding this matter, we welcome you to contact the office.

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