We estate planning attorneys have been waiting for a new law since the “old” law went into effect in 2002. Surely the smart people in Washington DC will come up with a new law prior to the sunset of this law at the end of 2010… surely… and time kept ticking on toward December 31, 2010. Now, FINALLY, on December 17, 2010 the new law was signed.
The headlines read that the Bush era tax cuts are continued for two years. This is true in many ways but in the estate planning field the tax cuts were not only continued but, in my opinion, cut more. Starting January 1, 2011 and for the next two years, each of us can give away FIVE MILLION DOLLARS tax free at death. Yes, $5,000,000… and yes, TAX FREE! Plus, you can use a deceased spouse’s unused exemption thus creating a $10,000,000 exemption! Of course, you have to have the five or ten mil for this to apply but there are people out there who do… many of them my clients!
Plus, and this is the HUGE change… starting January 1, 2011 you can give away $5,000,000 during your lifetime. The only $1,000,000 “gift tax” exemption at stayed in place from 2002 until 2010 while the “estate tax” (or death tax) exemption made it’s march up, up, up. To me this was always the tell that eventually the estate tax exemption would go back down. However, this $5,000,000 gift tax exemption is just huge. It tells me the people in Washington DC are more serious about long term estate tax cuts. We shall see in the next two years if I am right.
Additionally, the dreaded generation skipping transfer tax (“GSTT”) will go up to a $5,000,000 exemption on January 1st. This is huge for families that want to set up multi-generational dynasty trusts.
The bottom line is whether you have a trust or not, whether you have five mil or not, you need to get with an estate planning attorney ASAP and review your estate!
Call me if I can help! -John