Important Legal Changes to Tax Laws and Estate Plans.
Estate Planning Update
2010 Tax Act
Dear Clients and Friends:
On December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 became law. This new federal law changes the taxation of estates and gifts, but only for two years, through December 31, 2012. Depending on your circumstances, you may benefit from some of the changes, including the following:
• The federal estate and gift tax exemption is increased to $5 million per person with a top tax rate of 35% for persons dying in 2011 and 2012 and for gifts made in 2011 and 2012.
• The Act provides “portability” for the estate tax exemption, allowing a surviving spouse to elect to take advantage of any estate tax exemption amount not used by the predeceased spouse.
• The generation-skipping transfer tax exemption is increased to $5 million for gifts and bequests to grandchildren and later generations.
Unless Congress takes further action, the new law sunsets on December 31, 2012, and federal estate and gift tax provisions will revert to those in effect before 2001, bringing back higher tax rates and lower exemptions.
There is still a separate Maine estate tax. The exemption from Maine estate tax remains at one million dollars, significantly less than the new five million dollar federal exemption. Individuals with assets of more than one million dollars and couples with combined assets of more than one million dollars must continue to plan appropriately to minimize Maine estate tax liability. Many estate plans that were designed to take advantage of the former federal estate tax exemption should be revised to avoid unexpected Maine estate tax liability.
As always, we recommend that clients review their estate plans periodically, in light of changes in the law and changes in your family and financial situation. In particular, we recommend that clients review their estate plans if they have not done so since the Maine estate tax law changed in 2003.
Please contact us with any questions, or if you would like to discuss your estate plan in light of the recent tax law changes.