Revised Estate Tax Appears to Be a Done Deal

Revised Estate Tax Appears to Be a Done Deal

As I write this post, the new tax law appears to be a done deal. We are just awaiting President Obama to sign off on it. It will probably take me a week or so to digest all of the finer points of the new tax law, but I will briefly discuss the main points that I am aware of:

  1. The new estate tax AND gift exemption amounts will be $5,000,000 per person (this is a reunification, previously the gift tax exemption amount had been $1,000,000) – This takes effect in 2011;
  2. There will only be one rate for gift and estate taxes – 35% on transfers above the exemption amount – This also takes effect in 2011;
  3. Capital Gains tax rates will continue at 15%
  4. It appears that there is a portability provision. This would allow one spouse to give the other spouse everything outright at death, and then the surviving spouse would have a $10,000,000 exemption. (NOTE: This would not be advisable in New Jersey or New York where an increase in state estate tax would result.)

Also of note:

  1. There appears to be a 0% GST tax rate for 2010, so for the super wealthy, you have another few weeks to fund generation skipping trusts. In 2011 and 2012, the GST Exemption amount will be $5 million;
  2. There appears to be an extension of a provision that would allow certain IRA owners to contribute money in their IRA to charity with favorable tax consequences;and of course
  3. There will be a continuation of almost all of the tax rates that were in place in 2010.


It looks like I owe my dad a dinner.