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2010 Estate And Gift Tax Changes
2010 Estate And Gift Tax Changes
2010 Estate And Gift Tax Changes
2010 Estate And Gift Tax Changes
2010 Estate And Gift Tax Changes
2010 Estate And Gift Tax Changes
2010 Estate And Gift Tax Changes
2010 Estate And Gift Tax Changes
2010 Estate And Gift Tax Changes
2010 Estate And Gift Tax Changes
2010 Estate And Gift Tax Changes
2010 Estate And Gift Tax Changes
2010 Estate And Gift Tax Changes
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2010 Estate And Gift Tax Changes

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Description of estate and gift tax changes in the 2010 Tax Relief Act by Rob LeChevallier

Description of estate and gift tax changes in the 2010 Tax Relief Act by Rob LeChevallier

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  • 1. Estate and Gift Tax Changes 2010 Tax Relief Act By: Rob Le Chevallier Attorney-at-law
  • 2. Overview <ul><li>Reduces Estate, Gift and Generation Skipping Taxes for 2011and 2012. </li></ul><ul><li>Preserves Estate Tax Repeal for 2010. </li></ul><ul><li>Revives Estate Tax for 2010 with $5 million exemption. </li></ul><ul><li>Reinstates stepped-up basis to date of death values. </li></ul><ul><li>Allows portability of exemptions 2011-12. </li></ul>
  • 3. New Lower Rates <ul><li>2009 federal exemption was $3.5 million with top 45% rate. </li></ul><ul><li>2010-2012 $5 million and top 35% rate with inflation adjustment starting 2012. </li></ul><ul><li>2013 and thereafter ???? If Congress does not extend, reverts to $1.0 million federal exemption and top 55% rate. </li></ul>
  • 4. Special Rules for 2010 <ul><li>Estates of persons dying in 2010 have a choice: </li></ul><ul><li>Estate tax exemption of $5 million and step-up in basis in assets. </li></ul><ul><li>No estate tax and modified carryover basis ($3.0 million to spouse and $1.3 million to other heirs). </li></ul><ul><li>Default is estate tax unless no estate tax elected on Form 706. </li></ul>
  • 5. Gift Tax Changes <ul><li>2009 gift tax on excess over lifetime gifts of $1.0 million plus annual gift exemption of $13,000 per person </li></ul><ul><li>2010 same exemptions except gift tax rate was reduced to 35% </li></ul><ul><li>2011-2012 $5 million unified credit (either lifetime or death) with 35% tax rate plus annual gift exemption) </li></ul>
  • 6. Gifting Opportunity <ul><li>The new law creates a gifting opportunity for the next two years using the $5 million exemption </li></ul><ul><li>Valuable for business and real estate owners that want to make gifts of stock or property while values are lower. </li></ul><ul><li>Future appreciation will be in estate of children rather than parents or grandparents. </li></ul>
  • 7. GST Changes <ul><li>GST is an additional tax on gifts or bequests to grandchildren (or anyone 37.5 years younger) when their parents are still alive. </li></ul><ul><li>Concept is IRS would otherwise collect estate tax on death of children. </li></ul><ul><li>Same rate as the estate tax </li></ul><ul><li>Lowers GST taxes by increasing exemption to $5 million and 35% rate. </li></ul>
  • 8. New Portability Feature <ul><li>Allows last surviving spouse to use unused exemption of spouse who dies after 2010 and before 2013. </li></ul><ul><li>Effectively allows $10 million to be passed to children or grandchildren. </li></ul><ul><li>If made permanent may eliminate need for tax planning credit shelter trusts. </li></ul>
  • 9. More on Portability <ul><li>If wealthy spouse remarries you lose unused exemption of deceased spouse. </li></ul><ul><li>Zsa Zsa Gabor –under new estate tax scheme she should marry for love first, wealth second and a poor spouse third! </li></ul>
  • 10. Advantages of Retaining Credit Shelter Trust <ul><li>Trust is irrevocable at first death. </li></ul><ul><li>Asset protection in event of future divorce or financial set-back. </li></ul><ul><li>Maintains distributions to heirs agreed upon by spouses while both alive. </li></ul><ul><li>Preserves estate tax exemption of first spouse to pass away. </li></ul><ul><li>Not dependent on what happens in 2013. </li></ul>
  • 11. Disadvantages of Credit Shelter Trust <ul><li>Irrevocability may limit future flexibility unless surviving spouse has limited power of appointment. </li></ul><ul><li>More trusts to administer after death of first spouse. </li></ul><ul><li>Higher legal and accounting expenses. </li></ul><ul><li>May be unnecessary for smaller estates if portability becomes permanent. </li></ul>
  • 12. Disclaimer Trusts <ul><li>If new law is made permanent more clients will use disclaimer trusts. </li></ul><ul><li>All assets given to surviving spouse. </li></ul><ul><li>Surviving spouse must disclaim in writing within 9 months of death and before spouse takes benefit of assets. </li></ul><ul><li>Assets disclaimed go to credit shelter trust with spouse as trustee. </li></ul>
  • 13. Conclusion <ul><li>New law will benefit most estates by reducing federal estate taxes. </li></ul><ul><li>Does not affect state inheritance taxes so we still need to do tax planning. </li></ul><ul><li>Take advantage of gifting opportunity. </li></ul><ul><li>Consider both credit shelter trusts and disclaimer trusts when revising your estate plan. </li></ul>

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