Estate Planning for Transfer Taxes (i.e., Estate Tax and Gift Tax)

As you likely know by now (especially if you are a loyal reader of  my Blog), the Federal Estate Tax lapsed in 2010 and Congress has not yet decided what to do about it. Last week I ran across another good end-of-year planning article, written by Robert Wood for Forbes. I think his tips are worth repeating here.

1. Remember that, even though there is no estate tax this year, executors for estates valued at more than $1.3 million still must file an “informational” return with the IRS.
   
   
2. While some (morbid) people are referring to this as “the year to die,” it is perhaps more importantly “the year to give.” The Gift Tax is still in place at 35%, with an annual exclusion of $13,000 per person ($26,000 for a married couple who choose to combine their gifts). While that may seem steep, it’s actually a bargain compared to the 55% tax expected to go into effect next year. If giving in large amounts is in your plans, consider doing so before year’s end.
   
   
3. Finally, the Estate Tax didn’t die alone. The Generation Skipping Transfer (GST) Tax also is lapsed until December 31^st. The GST Tax works as the name suggests by taxing the transfer of funds that skip a generation, say from parent to grandchild or great grandchild. It is applied in addition to the gift tax when you make a large gift to your grandchild. The GST returns next year, and while grandparents will still be able to shield as much as $1.31 Million, any more than that will be subject to GST at 55% in addition to the Gift Tax (expected to be 55% as well). If you plan on a very large gift across generations, now is the time.

I am anxious to see what will happen with transfer taxes.  However, as I think I have made clear in other posts, I expect that the need for revenue by the federal government will eventually come into play in the world of transfer taxes--putting pressure on leaving a transfer tax in place.  Further, I will not be surprised to see more states with transfer taxes (note:  state transfer taxes dependent on the federal tax system will swing back into effect on January 1, 2011).    

To resolve and address your estate planning concerns, you need to visit with an estate planning attorney / tax attorney.  Experienced planners will help you navigate these complex laws.  Of course, we hope you will consider our office for your estate planning and tax planning needs.  I invite you to visit the Estate Tax practice center on our website to learn more about these transfer taxes, and even estimate your federal estate tax liability using our handy estate tax calculator.

Comments

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