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The 2010 Tax Relief Act has resulted in significant changes to the estate and gift tax rules, providing some clarity — at least for the next two years.

The 2010 Tax Relief Act brought significant changes to the estate and gift tax rules – and an excellent opportunity for you to review your estate planning goals, and the legal documents to achieve them. The new law is complex, and the rules are only in place for two years – this year and next. SmartBusiness recently ran an article highlighting some of the more important provisions:

  • Estate Taxes. The estate tax exemption will be $5 million ($10 for a married couple), with a maximum tax rate of 35 percent. The new law also provides a “portability” feature of the exemption amounts for married couples. Any exemption amount that remains unused at the death of a spouse is available for use by the surviving spouse. These two changes – the increase in the exemption amount and the portability feature – could impact your estate plan if your planning strategy includes a Credit Shelter Trust. Under certain circumstances, your credit shelter trust could be over-funded, leaving limited assets for your surviving spouse. It also is possible that you may no longer need a credit shelter trust at all.
  • Gift Taxes. The new gift tax exemption is set at $5 million, up from just $1 million. Generally, you may consider gifting property that you believe will appreciate in value. Gifting now will now only remove the current value of the property from your estate, but also any future appreciation.

Remember, even if your total estate is less than $5 million, you (and your family) still need comprehensive estate planning to take advantage of tax planning opportunities available to you and to ensure that your wishes are carried out in the event of your death or disability.


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