By : | Category : Estate Planning, Estate Taxes, Family Trusts, Financial Planning, Living Trusts, Orange County | Comments Off on NEW ESTATE TAX LAW – WHAT IT MEANS TO YOU

19th Jan 2011

Last month, the President signed into law the “Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.

The new law reinstates the estate tax, but sets the exemption amount at $5 Million, and sets the maximum tax rate at 35%.

If the law had not been enacted, the EGTRRA (Economic Growth and Tax Relief Reconciliation Act of 2001) would have expired on December 31, 2010; in 2011 the exemption amount would have been $1 Million with a cap of 55%.

The most interesting part of the new law is the “portability rule” which allows a surviving spouse to use the unused portion of their deceased spouse’s credit.  

For example, if the deceased spouse passes away in 2011 or 2012, and uses only $2 Million of their $5 Million exemption; the surviving spouse can file a 706 Estate Tax Return and elect portability of the unused portion of the credit; in this example, $3 Million, and add to his or her $5 Million credit.

Because of the danger of the law expiring on December 31, 2012, and reverting to the draconian $1 Million exemption amount; estate planning lawyers are likely to have surviving spouses’ file the 706 and elect the portability to offset the chance of the higher estate tax on their future death.

The new law gives some breathing room to middle class estates, small businesses and family farms with illiquid assets.

What happens in 2013 beyond is anyone’s guess.  I suppose Washington can’t think that far ahead.

But you should, and protect yourself and your loved ones.

Estate Planning Attorney


This blog is intended for informational purposes only, and is not a substitute for legal advice from a qualified attorney in your jurisdiction.

Comments are closed.