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Congress approves the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010
Posted in Estate Planning

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 passed the U.S. House last night, and is expected to be signed by President Obama today. The Act includes the following significant changes to the federal gift tax, estate tax and generation skipping tax. These are preliminary highlights. The Estate Planning Practice Group at Bingham Greenebaum Doll will delve deeper into the legislation once the President signs it into law. Look for more updates in the coming weeks. Significant tax changes created by the Act

  • There will be a $5 million exemption, indexed for inflation for the following:
    • Estate tax,
    • Gift tax, and
    • GST Tax.
  • The Gift and Estate Tax Exemption will be re-unified, so now $5 million (indexed) may be given away during life gift tax free.
  • The maximum tax rates for Estate, Gift and GST taxes will be 35 percent.
  • State death taxes will become a deduction, not a credit.
  • Basis at death: The Act will return to the fair market value basis for property, also known as the “stepped up basis.”
  • For estates of decedents who died in 2010, such estates may choose to have the  new estate tax rules apply ($5 million exemption,  35 percent rate, and  stepped up basis), or have no estate tax and use the modified basis under 2010 rules (as in existence prior to passage of the Act).
  • Portability of the Gift and Estate Tax Exemption:
    • The amount of the unused exemption will be added to surviving spouse’s exemption at surviving spouse’s death.
    • If the surviving spouse is predeceased by more than one spouse, the carry-over exemption will be the lesser of $5 million or the unused exemption of the last such predeceased spouse.
    • The unused exemption will be available to a surviving spouse only if election is made on a timely filed (including extensions) estate tax return for estate of first spouse to die.

For more coverage, see the Wall Street Journal article, “Congress Passes Tax Deal.” >> If you have questions about how the Act will impact your estate plans, please contact the attorneys of the Bingham Greenebaum Doll Estate Planning Practice Group.

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