Thanks to quick action by Congress, estate tax cuts put in place by President George W. Bush were extended in late 2010, keeping huge tax bills at bay for most Americans until 2013. American Bar Association (ABA) real property/trust/estate law section chairman Alan Rothschild estimates that only one-half of one percent of those who die in 2011 will be subject to the estate tax.
In conjunction with the extended tax cuts, another congressional action – raising the gift tax exemption – offers additional savings. The raised exemption means that people can give their heirs tax-free gifts of millions – even tens of millions – of dollars. These fixes are temporary, however, and the estate tax rate and gift tax exemption will return to their pre-recession levels in 2013. This will mean a much lower amount of tax-free money gifting and a much higher estate tax rate for even those who are modestly wealthy.
There are two different methods allowed under the law to handle estates of people who die in 2011:
Regardless of how which action you choose, heirs will be paying far lower estate tax amounts than in prior years. These taxing schemes can also be retroactively applied to 2010 estates to save heirs money.
A temporarily lowered estate tax rate should never prevent proper estate planning. Proper estate planning using tools like wills, trusts and pre-death gifts can be used to:
The current estate tax hiatus will not last forever, and estate taxes are definitely not the only thing that needs to be addressed in a comprehensive estate plan. No matter the size of your estate or the amount of assets you have, planning ahead is vital to ensuring that your assets are protected and your loved ones are provided for. Speak to an experienced estate planning attorney in your area to learn more about estate planning tools and techniques and to get answers to any questions you may have. It is never too early or too late to get started on your estate plan.