Federal Estate Tax lapses in 2010 and Congress has not yet decided what to do about it.
As you may know by now, the Federal Estate Tax lapsed in 2010 and Congress has not yet
decided what to do about it. I ran across another good end-of-year planning article, written by Robert Wood for Forbes. I think his tips are worth repeating here.
1. Remember that, even though there is no estate tax this year, executors for estates valued at
more than $1.3 million still must file an “informational” return with the IRS.
2. While some (morbid) people are referring to this as “the year to die,” it is perhaps more
importantly “the year to give.” The Gift Tax is still in place at 35%, with an annual exclusion of
$13,000 per person ($26,000 for a married couple who choose to combine their gifts). While
that may seem steep, it’s actually a bargain compared to the 55% tax expected to go into effect
next year. If giving in large amounts is in your plans, consider doing so before year’s end.
3. Finally, the Estate Tax didn’t die alone. The Generation Skipping Transfer (GST) Tax also is lapsed
until December 31st. The GST Tax works as the name suggests by taxing the transfer of funds
that skip a generation, say from parent to grandchild or great grandchild. It is applied in addition
to the gift tax when you make a large gift to your grandchild. The GST returns next year, and
while grandparents will still be able to shield as much as $1.31 Million, any more than that will
be subject to GST at 55% in addition to the Gift Tax (expected to be 55% as well). If you plan on
a very large gift across generations, now is the time.
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