I must admit that I was very surprised that Congress and the President made changes to the federal estate tax provisions that essentially eliminated the estate tax for 99.5% of the American population.
I am been going under the assumption for most of this year that Congress would allow the estate tax exemption to lapse to where it was in 2001. This would have meant that "just" the first $1 million of an estate would be exempt from estate taxes.
Instead, for the next couple of years, the estate tax exemption will rise to $5 million (or $10 million for married couples who do the simplest estate planning), with the maximum tax rate dropping to 35% from 45% currently.
There's lots more in the recent tax bill that probably means some near-term work for estate lawyers but this past Saturday's New York Times carried a good article discussing some of the implications.
Here's an excerpt, with the full link below:
OPTIONS FOR 2010 Under the estate tax wording in the bill, the heirs of people who died this year will have two options for a tax bill. If they chose to treat the estate by the tax laws in place in 2010, they will have to calculate the capital gains on all assets in the estate to determine if the value is above a level the Internal Revenue Service is allowing. This “artificial step-up in basis” is $1.3 million to any heir and $3 million to a surviving spouse.
The other option is to apply the 2011 law, which would exempt the first $5 million of the estate and impose a rate of 35 percent on anything above that. This is far more generous than the 2009 law — a $3.5 million exemption and a 45 percent tax rate — which many people thought would be reinstated.
Estate Tax Will Dwindle Under Tax Cut Package - NYTimes.com
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