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Estate Planning News
House Votes To Reform Estate Tax
The U.S. House of Representatives voted today to reform estate taxes by passing the Permanent Estate Tax Relief Act (H.R. 5638).
Also known as the “death tax,” the estate tax is a tax on the value of a deceased individual’s assets before they are passed to their heirs.
The bill reunifies the estate, gift, and generation-skipping transfer taxes and increases the estate and death tax exemption to $5 million per person. In addition, married couples can carry over any unused part of their spouse’s $5 million exemption. For estates between $5 million and $25 million, the rate of tax will be the same as the capital gains tax rate. On estates valued at more than $25 million, the top marginal rate of tax will be double the capital gains tax rate.
Estates valued at $5 million or less would be subject to no estate tax beginning in 2010. Between $5 million and $25 million would be subject to a 15% tax in 2010 and a 20% tax in 2011 and thereafter, unless the lower rates are extended by a separate law. Estates at or exceeding $25 million would be subject to a 30% tax in 2010 and a 40% tax in 2011 and thereafter, unless the lower rates are extended by a separate law.
The death tax relief provided in the first Bush tax cut (Public Law 107-16, the Economic Growth and Tax Relief Reconciliation Act of 2001) will end at the start of 2011. Without further legislative action, the estate tax exemption will drop to $1 million per person and the maximum estate tax rate will increase to 55% (with a possible 5% surtax) in 2011, after years of decreasing estate tax rates and increasing exemptions.
“The current law has created huge uncertainty by calling for an unlimited exemption in 2010 and then dropping to an exemption in 2011,” said U.S. Rep. Bob Inglis (R-SC). “That’s not workable. This reform will give some certainty of tax treatment and a fairer tax treatment. Individuals with substantial farms, businesses and other appreciated assets of up to $5 million will be able to pass those assets to their heirs estate-tax-free. Individuals with estates of over $5 million will pay estate taxes."
A "Family Limited Partnership" can be used to own and manage your property
In a similar manner to a Trust, but allowing additional tax planning techniques to be employed. Family Limited Partnerships are typically used for those who have large estates and thus have a need for specialized estate planning in order to minimize federal and state estate/death/inheritance taxes as well as provide elements of asset protection.
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Establishing A Trust Fund
A trust is a separate legal entity that holds property or assets of some kind for the benefit of a specific person, group of people or organization... Read more >
Definition:
The total of all assets, all debts and other obligations of an individual. At the time of death the total amount of benefits (life insurance, annuity and retirement benefits) to be paid to beneficiaries are often also considered part of the estate for Federal Estate Tax purposes
Probate
Definition:
The process through which the legal title to property is transferred from a decedent to the beneficiaries. If a person dies with a will (testate), the probate court determines if the will is valid, hears any objections to the will, orders that creditors be paid and supervises the process to assure that property is distributed by the Personal Representative or Executor according to the terms of the will. If a person dies without a will (intestate) the probate court appoints an Administrator who receives all claims, pays creditors, and then distributes all property according to the laws of the state.
Interlineation
Definition:
Something written in-between; often a change to a typed document that is made by crossing out words and entering in replacement words. Never change an executed will or trust by interlineation.
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