For the next two years, the federal estate tax will be restored. The Bush-era tax cuts included a sunset provision that temporarily eradicated the estate tax for 2010. The tax is back, but the exemption has increased.
It was a surprise to many following this issue when President Obama not only extended the Bush-era tax cuts, but also increased the federal estate tax exemption to $5 million for individuals and $10 million for couples.
According to a recent Mercury article, entitled, How Restoration of the Federal Estate Tax will Affect You,
some interesting implication are assessed:
“The new law restores the federal estate tax for the next two years at a 35 percent tax rate, with estates up to $5 million ($10 million for couples) exempt from the tax. Furthermore, the new estate tax is retroactive to Jan. 1, 2010.”
The article further goes on to elaborate:
“This means that heirs of persons dying in 2010 can choose either to follow the 2010 rules (no federal estate tax at all, but with a limited step-up in the cost basis of inherited assets), or to follow the new law with a $5 million exemption and a step-up in cost basis.”
There has been some concern among attorneys as to whether the public will understand the need to properly plan a will or trust in light of these large exemptions. On the contrary, the new tax laws that are in-flux should, if anything, prompt families to seek an updated assessment of their existing will or trust documents.
Image: renjith krishnan / FreeDigitalPhotos.net Evan H. Farr on Google +
About Evan H Farr, CELA, CAP
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