Taxes

NY Times: Don't Let the Tax Tail Wag the Estate Planning Dog

by RobRoy on 30 August 2010 - 4:32pm

A recent New York Times article discussing the uncertainty of the Estate Tax environment provides some important reminders about opportunities that currently exist for saving on taxes.  Perhaps more importantly, however, the last few paragraphs of the article reminds us that sometimes, in an effort to "stick it to the IRS," we can sometimes get carried away and allow the tax tail to wag the estate planning dog.

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Mid-year Update on Current Estate Tax MESS

by RobRoy on 13 August 2010 - 12:42pm

As you may have heard, the federal estate tax rules changed radically in 2010 and could change radically again in 2011 unless Congress passes new legislation. This article is intended to advise you of what has happened and encourage you to reevaluate your estate plan as soon as possible.

2001 Tax Act. In 2001, Congress passed the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) which provided for significant phased-in increases in the federal estate, gift and generation skipping tax (GST) exemptions and lower tax rates. EGTRRA provisions included:

• In 2009, the estate and GST exemptions increased to $3.5 million per decedent, with a flat 45% estate and GST tax rate on any excess. The gift tax exemption was $1.0 million, with tax rates from 41% to 45%.

• In 2010, the federal estate and GST taxes were repealed for one year. The gift tax $1.0 million exemption remained, with a lower flat tax rate of 35%. Thus, you had to die or pay gift tax to get the benefit of the change. The step up in basis rules (which gave a “fresh-start” fair market basis for most assets of a decedent) was replaced with an adjusted carry-over basis. These new basis rules permit a step up in basis of up to $1.3 million, plus an additional $3.0 million for certain spousal transfers at death.

• On January 1, 2011, EGTRRA will be automatically repealed, resulting in an odd situation:

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Estate Taxes Will Continue To Be An Issue

by RobRoy on 17 January 2009 - 5:24pm

A recent article in the Wall Street Journal provided an in depth look at the history of the development of the estate tax in the U.S. as it currently stands.  Although the Republican and Democrat supporters of the repeal of the federal estate tax had managed to pass a law phasing out and ultimately repealing the estate tax, their efforts seem to nevertheless be on the rocks today with the incoming Obama administration and decidedly fiscally liberal majority in congress. 

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New $13,000 Annual Gift Tax Exclusion

by RobRoy on 24 November 2008 - 5:30pm

The IRS recently announced that the annual gift tax exclusion amount will increase from $12,000 to $13,000 beginning Jan. 1, 2009.  This means that every individual can give away up to $13,000 per person, per year without having to file a gift tax return. For example, you could make a gift of $13,000 to each of your three children and to each of their spouses for a total of $78,000 per year (or two times that amount for married couples).  There is no limit to how many individuals you may make gifts to.

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