Estate Tax?

by J.C. Bailey

2010 and the Great Unknown

You may have heard something about the importance of 2010 as it relates to the “Death Tax.” The federal estate tax is referred to as the “death tax” because it taxes assets in a decedent’s estate above a certain exemption amount at a high tax rate. The significance of the year 2010 is that estates where the decedent dies in 2010 should have an unlimited exemption amount. Beginning in 2001 the estate tax exemption equivalent was increased from $1,000,000.00 to $1,500,000.00, then to $2,000,000.00, with a 2009 exemption amount of $3,500,000.00. The federal estate tax was to disappear in 2010, but only for one year. We expected that Congress would be able to pass new legislation before the end of 2010, but our expectations have not been met. The lines have been drawn with a $1,000,000.00 exemption and a 45% rate on one side, and a $5,000,000.00 exemption and a 35% tax rate on the other.

If you have read this far you may ask what this means to you and what, if anything, you should do about it. Without action by Congress, decedents dying after December 31, 2010, will have a $1,000,000.00 exemption and a 45% tax rate applied to the assets of their estate that exceed that exemption. Depending on your individual circumstances, assets, liabilities, marital status, etc., you may have a taxable estate as of 2011 and beyond. We cannot predict the future, but we can plan for the contingencies. If you don’t have an estate plan, make an appointment with an experienced estate planning attorney. If your estate plan is more than a few years old or your circumstances have changed since your plan was drafted, have the plan reviewed ASAP.

Leave a Reply