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Current Updates 3-1-11

Event Date:  Feb 15-2012

The 2010 Tax Relief Act extended favorable tax cuts for the next two years-postponing the issue to 2013.  Clients should act now to lock in these tax benefits.  The act, which, among other things, grants a two year extension of the estate tax--subjecting estates worth more than $5 million to tax at a rate of 35%.

Summary of changes:

The 2010 Tax Relief Act has made the following changes to the tax law:


Estate Tax:
  • Exemption: $5 million.
  • Top Tax Rate: 35%

Special Option for People Who Die in 2010:
The legislation is retroactive. 2010 decedents are subject to estate taxes and get the benefit of a $5 million exemption.  However, executors of the estates of 2010 decedents get the option of electing back into the estate tax repeal.  In other words, executors may choose: {1) application of the new law; or {2) no estate tax but application of the modified carried over basis regime (carryover basis with $1.3 million and $3 million basis adjustments).

Previously, married couples who wanted to take full advantage of each spouse's estate tax exemption had to do estate planning which included a bypass trust.  Beginning in 2011, the executor of a deceased spouse's estate may make an irrevocable election in the timely filed estate tax return to roll over any unused exemption to the surviving spouse without the use of a bypass trust.

Generation-Skipping Transfer Tax:

  • Exemption: $5 million
  • Tax Rate for 2010: 0%
  • Tax Rate for 2011-2012: 35%


Gift Tax:
  • Exemption in 2010: $1 million
  • Exemption in 2011-2012: $5 million
  • Tax Rate for 2010-2012: 35%

Why this is important:

The bottom line: uncertainty continues to surround the estate tax. With every new tax law comes challenges and opportunities. The 2010 Tax Act has plenty of both.