It came, later than expected–there’s a new estate tax and gift law, and it was worth the wait. Estates under $5,000,000 will pass to beneficiaries estate tax free, and married couples can give double that amount. The top tax rate has also been reduced, so if you’re fortunate enough to have over $5,000,000, the tax rate has been lowered to 35%.
The other big news is that the gift tax exemption is once again unified with the estate tax, meaning the $5,000,000 limit applies to gifts you make during your lifetime as well, which means we’ll probably see some large gifts being made over the next couple of years.
The only bad news is that these amounts are only in effect through 2012, when Congress will presumably agree on extending them or offering something even better. If not, we’ll be back to a $1,000,000 limit.
The new law means that very few people will be paying any estate tax. Alan Rothschild, who chairs the American Bar Association’s real property, trust and estate law section, estimates that less than one-half of one percent of people dying this year will leave estates owing any estate tax. Back in 1977, 10.5 percent of estates paid estate tax.
Even if your estate is taxable, we still have plenty of options to reduce or eliminate it, and with the new limits, it’s even easier to do so.
For the majority of people who don’t have taxable estates, planning is a bit simpler now, but just as important as it’s always been–a well-drafted plan avoids high probate fees, high conservatorship fees from incapacity and the wrong people getting what you have. Contact us today at (888) 503-7615, firstname.lastname@example.org or at our website to see how your plan can work with the new law.