We wanted to make you aware of a new law that may significantly impact you and your family. On December 17, 2010, Congress enacted the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (H.R.4853). Along with extending many of the individual and capital gains tax cuts enacted during President Bush’s administration, Congress provided temporary modifications to estate, gift, and generation-skipping transfer taxes. Please see the next page for further details. These modifications are set to sunset on December 31, 2012, assuring that these issues will once again be discussed in the year of a Presidential election.
What Does This Mean For You?
Now that the new law is in effect, we suggest that you contact us to determine if your estate plan needs to be modified. Please contact one of HAO’s Tax, Estate & Benefit Planning Section Members: Gary N. Anderson, Dale G. Siler, Brian G. Cannell, or Monica N. Howard, at (435)752-2610 to schedule an appointment.
Hillyard, Anderson, & Olsen, PC is a full-service law firm, and we are pleased to offer legal services in the following areas, among others:
- Power of Attorney
- Trust Administration
- Guardianships / Conservatorships
- Corporate, LLC & Other Business Formation
- Business Succession Planning
- Pre & Post-Nuptial Agreements
- Divorce & Family Law
- Personal Injury
- Criminal Defense/DUI
- Civil Litigation/Appeals
- Real Estate
- Juvenile Court
- Pension Plans/ERISA
- Water Law
- Tax Law
We often receive questions from our clients about their personal financial strategies. One such financial planning resource, with whom we have been pleased, is the firm of Allegis Financial Partners (AFP). AFP provides strategies for IRA distributions, estate and insurance planning, and policies which combine a Long Term Care and Life Insurance policy. If you have any questions regarding your personal financial strategies, and would like to arrange for a complimentary (FREE) financial review with someone from AFP, please contact Kim Jenson, Estate Planning Paralegal. She may be reached at the phone number listed above or by email at [email protected] for scheduling purposes.
Highlights of the New Law
Congress increased the estate tax applicable exclusion amount to $5 million per individual ($10 million per couple) with a maximum estate tax rate of 35%. If Congress had not acted, then starting on January 1, 2011, the estate tax applicable exclusion amount would have only been $1 million dollars with a maximum tax rate of 55%. Congress also eliminated the modified carryover basis rules. Therefore, any property in a decedent’s estate will generally receive a step-up in tax basis to the amount of the property’s fair market value on the date of the decedent’s death.
Gift and Generation Skipping Transfer Tax
During 2010, an individual had an applicable exclusion amount of $1 million dollars. Any lifetime gifts totaling more than $1 million, excluding gifting using the annual gift tax exclusion amount ($13,000 per donee, in 2010 and 2011, for a total of $26,000 for both spouses), were taxed at a maximum tax rate of 35%. Going forward, the temporary modification reunifies the estate and gift tax to provide an applicable exclusion amount of $5 million, with a maximum tax rate of 35%. Effectively, such taxable lifetime gifts reduce the estate tax exclusion amount that would otherwise apply. There was no GST tax for direct transfers made during 2010. In 2011 and 2012, there is a $5 million exemption with a maximum tax rate of 35%. These changes may provide some unique gifting opportunities.
A surviving spouse may now have their applicable exclusion amount increased by the deceased spouse’s unused exclusion amount. For example, if David dies on January 1, 2011 and only uses $2 million of his applicable exclusion amount, then if a timely election is made, David’s surviving wife could potentially have up to an $8 million dollar applicable exclusion amount. In order to take advantage of this portability, a timely special election is required by the executor of the deceased spouse’s estate. If someone in your family passes away during 2011 or 2012, please contact us so that we can ensure that a timely election is made to preserve this benefit for your family. This portability feature, like the estate tax changes generally, is also set to expire on December 31, 2012, unless otherwise continued by Congress in that election year.
Decedent Passing Away in 2010
The new law allows the estate of a decedent who passed away during 2010 the option of either (1) paying no estate tax but have modified carryover tax basis rules apply, or (2) using the new $5 million exemption/35% rate with a step-up in basis to market value on the date of death. If someone in your family passed away during 2010, we would be happy to work with you and your accountant to make an advantageous election for you. b>
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