ESTATE TAXES 2010 - 2011
The tax laws regarding estates are still unresolved. In 2009 an estate could reach $3,500,000 without incurring estate tax. In 2010 the estate tax was completely eliminated, but most estate tax planners felt there will be retroactive legislation which would restore the $3,500,000 tax credit. As of July, 2010 this has not happened.
IRS Answers Estate Tax Questions, July 2010:
Will the estate tax return in 2011?
Yes. Under current legislation, the estate tax repeal will “sunset”, effective January 1, 2011. Therefore, the estate tax is applicable to decedents dying after December 31, 2010.
What are the exemption amounts and tax rates for 2011?
Under current legislation, the exemption amount for estates and gifts is $1 million. For GST transfers, the exemption amount is $1 million with an inflation adjustment. Under current legislation, the maximum rate for estate, gift, and GST tax is 55%, with a surtax for estate and gift transfers between $10 million and $17,184,000.
Will Congress retroactively reinstate the estate tax for decedents dying in 2010?
We do not know. If legislation is enacted regarding the estate tax, the IRS will act swiftly to assess the impact of such legislation and provide guidance to taxpayers regarding their tax obligations and filing requirements.
Will Congress change the exemption amount and rates for 2011?
We do not know. If legislation is enacted regarding the estate, gift or GST tax, the IRS will act swiftly to assess the impact of such legislation and provide guidance to taxpayers regarding their tax obligations and filing requirements.
Estate Planning - Reduce Your Taxable Estate
Annual Exclusion Gifts
In 2010, any individual is allowed to gift up to $13,000 per year to any person without incurring a gift tax. This is known as the annual exclusion amount. The only restriction on annual exclusion gifts is that the recipient must be allowed the right of immediate use and enjoyment of the gift. It is possible to qualify gifts into a trust for the annual exclusion by using what is known as a “Crummey” power. The use of Crummey powers allows a parent to make gifts to an irrevocable trust that can qualify for the tax free annual exclusion. A Crummey power gives the trust beneficiaries the right to immediately withdraw their share of the gift from the trust. This power generally lasts for 30 days from the date of the gift. If the beneficiary does not withdraw the gift during the 30 day period, the gift remains in the trust and is available for use as the trustee directs. This is the most common method to fund an irrevocable insurance trust.