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The tax cut extension package does dramatically change the game for everyone – married couples and singles alike – in terms of estate tax planning. In fact, that tidbit is probably the most important thing you should remember about the new legislation – it made significant changes to the estate tax law. The very fact that things have changed (again) means your estate planning probably should be reviewed.
The federal estate tax exemption is now $5 million, with a 35 percent applicable tax rate on the remainder. This means that if you are a single person with an estate of less than $5 million, you can leave everything you own to your relatives and loved ones without any estate tax bite. This is a significant increase from the zero-estate tax in 2010, and the $3.5 million exemption in 2009.

Accordingly, your estate planning documents could be out of date. For example, if your planning has not been reviewed since 2006, when the exemption was only $2 million, your documents may have directed your execute to make charitable donations sufficient to bring your estate under that $2 million threshold. Under the new scenario, that could mean giving away $3 million more than necessary.
Remember, too, that the new tax law is in effect only through 2012. What happens next is anybody’s guess.

So, your estate planning should 1.) include enough flexibility to adjust to a variety of potential taxing situation; and 2.) likely be reviewed again as the laws continue to change.

Changes in the tax law are just one of many reasons that your estate plan may need to be reviewed and/or updated.

If you want to schedule an estate plan with our office, please visit our website to learn more about the process.

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