ESTATE PLANNING CONSIDERATIONS:
You may be aware that the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the “Act”) (Pub. L. 111-312) was enacted on December 17, 2010. The Act makes significant changes to federal tax laws regarding estate, gift and generation-skipping transfer taxes.
Please note that the tax law changes made by the Act currently only apply through December 31, 2012. Consequently, absent further legislation to extend or further modify these changes, federal laws regarding estate, gift and generation-skipping transfer taxes will revert on January 1, 2013 to the status of these laws as they existed prior to 2001.
Some significant changes brought about by the Act in the estate, gift and generation-skipping transfer tax areas are as follows:
Estate Taxes: Estates of decedents dying between January 1, 2011 and December 31, 2012 will have available a $5,000,000.00 federal estate tax exemption, and will also be subject to a maximum estate tax rate of 35%. It is important to note that although the Act increases the federal estate tax exemption to $5,000,000.00, New York State will continue to impose an estate tax on estates that exceed $1,000,000.00.
Gift Taxes: The gift tax exemption and the maximum gift tax rate for gifts made in 2011 and 2012 is $5,000,000.00 and 35%, respectively. This change affords taxpayers the ability to make significant gifts and pass more assets to heirs gift tax free if the gifts are completed before 2013.
Generation-Skipping Transfer Taxes: The generation-skipping transfer tax exemption for 2011 and 2012 will be $5,000,000.00 and the maximum tax rate applicable to generation-skipping transfers will be 35%.
The sunset provision contained in the Act, absent further legislation or amendment, will cause the estate tax, gift tax, and generation-skipping transfer tax changes described above to expire after December 31, 2012. Thereafter, in 2013 the estate tax, gift tax, and generation-skipping transfer tax exemptions are scheduled to revert to $1,000,000.00 (with some adjustment for inflation) and the maximum tax rate for all such purposes will be 55%.
The changes implemented by the Act may affect your current estate plan. Consequently, it may be beneficial for you to review existing estate planning documents to determine whether revision is necessary to accomplish objectives in light of this new legislation. Regardless of whether the recent tax law changes will affect your estate plan, it is recommended that you periodically review your estate planning documents. Changes in your personal circumstances may make revisions to your existing last will and testament, trust, power of attorney, health care proxy, or statement of intent desirable. This office would be happy to meet with you and to work with your tax and investments advisors to review your current plan and, if necessary, to make revisions to accomplish your goals. Do not hesitate to contact this office directly should you wish to schedule an appointment.
