| The federal estate law is in flux. But with Congress seemingly unable to resolve the matter anytime soon, the current law repealing the estate tax for 2010 remains in effect. Therefore, if someone dies this year, his or her family will likely owe zero federal estate tax. What's more, the estate tax is scheduled to come roaring back in 2011, with a reduced equivalent exemption amount and a higher top tax rate.
If you been left in a quandary about estate planning, you're certainly not alone. Nevertheless, there are several logical moves you could make in 2010.
- Maximize the annual gift-tax exclusion: Under the exclusion, you can give any nonspouse relative cash or other property valued up to $13,000 this year without any gift-tax consequences ($26,000 for joint gifts by a married couple).
- Give away high-basis property: Due to the change to the carryover basis rules, younger family members may be socked with a big tax bill when they subsequently sell inherited assets. Therefore, if you're deciding on which property to give children or grandchildren, opt for high-basis property that will result in low income tax. Preserve low-basis property for your estate.
- Set up a trust for the grandkids: As with the federal estate tax, the GST (generation skipping tax) is repealed for 2010, but it is scheduled to return in 2011 with just a $1 million exemption. Therefore, you might create a trust to benefit grandchildren this year, especially if you intend to pass assets to them anyway. Even if the GST is revived, you're no worse off than you would have been.
- Avoid large 'deathbed' gifts: This is the opposite advice that severly ill individuals received last year. If you were to pass away in 2010, no estate tax would be owed under current law. But large gifts above the $1 million exemption could trigger a sizable gift tax.
- Review the terms of documents: For instance, if a credit shelter trust utilizes a miximum exemption clause, the trust document may have to be revised due to the reduction of the exemption to $1 million in 2011. Similarly, you should examine any power of attorney and health care proxies you've created to ensure that your intentions will be met under the changing law.
Of course, every situation is different. We would be glad to help you analyze your particular planning needs. Contact us at (816) 792-9966 or at
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