Estate Planning - Taxes

Tax planning is an integral component of estate planning, and the attorneys at Kramer Radin, LLP stay current on the most recent tax law changes in order to carefully minimize your personal estate tax obligations. The following is a brief summary of recent estate, gift, and generation-skipping transfer tax changes.

Federal Estate Taxes

Following months of speculation and uncertainty, on December 6, 2010 President Obama announced a tentative deal had been reached with the Republicans to extend the Bush era tax cuts. Effective January 1, 2011, estate taxes are once again in effect, but at an exemption of $5 million for an individual, or collectively $10 million for a married couple. The applicable estate tax is 35%. This exemption and estate tax will be in effect for two years. In 2013, the exemption will decrease to $1 million and the estate tax will be 55%. Federal estate taxes continue to be an estate planning challenge.

Federal Gift Taxes

For gifts made in 2011, the annual gift tax exclusion will remain at $13,000 per recipient. For 2011 and 2012, the lifetime exemption will increase to $5,000,000, and the gift tax rate on gifts in excess of $5,000,000 will remain 35%. The $5,000,000 exemption will be adjusted for inflation starting in 2012. Note that the rate for 2010, 2011 and 2012 is lower than the rate was in 2009, when it was 45%. Also, in certain cases where the donor has a predeceased spouse who died in 2011 or later, the donor may be able to use part of the predeceased spouse's unused gift and estate tax exemption.

Generation-Skipping Transfer Taxes

Generation-skipping transfer taxes (GST taxes) apply to outright gifts and transfers in trust that skip a generation or to unrelated individuals more than 37 and one-half years younger than the donor. GST taxes are imposed if the transfer avoids incurring estate or gift tax at each generation level. GST tax is imposed at the highest marginal estate and gift tax rate applicable at the time of the gift, bequest, transfer or termination. For generation skipping transfers occurring in 2011 or 2012, the exemption will be $5,000,000 (adjusted for inflation in 2012) and the tax rate will be 35%.

Seek Experienced Legal Counsel

An experienced attorney can advise you of your estate planning options and the possible tax consequences of each option. For effective advice, assistance, and representation with trust and estate issues, contact Kramer Radin, LLP.

IRS CIRCULAR 230 NOTICE: Please be advised that, based on current IRS rules and standards, the advice above was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. If this message is provided in any manner to another taxpayer, he or she cannot use the advice and should seek advice based on his or her own particular circumstances from an independent tax advisor.