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Quick Overview of the Estate Tax Law Changes

As many know, in 2001 Congress passed sweeping tax cuts which were set to expire on December 31, 2010. Included in that legislation was a provision that the estate tax, which was phased out in 2010, would be reinstated January 1, 2011, with an exemption amount of $1 million. The exemption amount is the amount of property which can pass free from estate tax. The scheduled 2011 exemption ($1m) was far lower than the exemption amount in 2009 (which was $3.5 million) and would cause a substantial estate tax in many circumstances, particularly since all assets are used in the calculation of an individual's gross estate, including life insurance.

In December, Congress addressed the expiration of the tax cuts (and resulting reinstatement of the estate tax) by reinstating the estate tax, effective January 1, 2011, for a period of two years. The reinstatement of the tax was offset, to some extent, by raising the amount exempt from tax to $5 million. Of equal importance, Congress raised the gift tax exemption (the amount an individual can give away during her life without any tax) to $5 million from the current $1 million level. This may provide certain gifting opportunities which did not exist in the past.

The current changes are only in effect for the next two years. As of January 1, 2013, the estate tax law is again scheduled to revert back to system in effect January 1, 2001 (an estate and gift tax exemption of $1 million). While the current changes will not necessitate changes to most estate plans, it is still prudent to review your current plan to determine whether changes need to be made to (i) optimize your plan for the next two years (ii) to determine whether estate and gift tax planning opportunities exist and (iii) to prepare for a possible reversion to 2001 estate tax levels.

Please feel free to contact me with any questions.

Categories: Estate Planning

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship

Bayer & Black, P.C. - Fairfield County Attorney

Wilton Office

195 Danbury Road, Suite 160
Wilton, CT 06897

Danbury Office

153 White Street
Danbury, Connecticut 06810

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195 Danbury Rd., Suite 160 P.O. Box 459 Wilton, CT 06897