There’s been much media attention on estate taxes in 2010 due to the lack of a federal estate tax during the year. What happened to the estate tax? In 2001, Congress voted to raise the estate tax exemption while cutting the actual rate of the tax. This act resulted in a repeal of the tax in 2010.
This was unexpected, as the law was intended to be only a temporary measure, and it was assumed that Congress would pass a new law to enact appropriate estate tax levels before the 2010 expiration, but it did not. Instead, the estate tax was actually eliminated as of January 1, 2010. But, unless Congress acts very quickly, the elimination of the estate tax is scheduled to expire at the end of 2010.
This means that the provisions of this 2001 Tax Act that reduced the tax and raised the exemption limit will no longer be effective on January 1, 2011, so the tax structure as of 2001 will take effect again. In other words, the federal estate tax is scheduled to return with a vengeance on January 1, 2011, with a tax of up to 55% on estates valued at more than $1 million.
So what does the estate tax situation mean to estate planning? While the future of estate taxes remains uncertain, there are still estate planning strategies available in the interim. An estate planning attorney can help you review and update your estate plans to ensure they are viable under the current tax laws, as well advise you of future strategies for upcoming changes.
With the federal estate tax exemption slated to be just $1 million in 2011, many families stand to benefit from estate planning, which can minimize or eliminate those taxes, now more than ever.