Generation Skipping Transfer

Estate PlanFor individuals dying after December 31, 2010, a federal estate tax is imposed at a rate of 35% on estates over $5 million, with the exemption amount to be indexed for inflation. A Generation Skipping Transfer (GST) Tax is imposed at a rate of 35% for 2011 and 2012 with an exemption of $5 million.

Summary of New 2011 Estate Tax Laws

For individuals dying after December 31, 2010, an estate tax is imposed at a rate of 35% on estates over $5 million, with the exemption amount to be indexed for inflation. A Generation Skipping Transfer (GST) tax is imposed at a rate of 35% for 2011 and 2012 with an exemption of $5 million allowed for 2011 and 2012. A gift tax is imposed at a rate of 35% for 2011 and 2012, with an exemption amount of $5 million in 2011 and 2012. The legislation also provides for portability of the estate tax exemption between spouses. This means that if the first spouse to die does not use the full amount of his or her estate tax exemption, the surviving spouse in most cases will be able to use the unused exemption of the deceased spouse plus his or her own exemption amount.

For the estates of individuals who died in 2010, the personal representative can elect to apply the “former” estate tax laws for 2010 or apply the new law. This affects capital gains taxes. If you are the personal representative of an estate for an individual who died in 2010, and the estate is worth over $5 million, a careful analysis is needed to determine which regime is most advantageous.

The new estate tax law is valid until December 31, 2012. If allowed to sunset, the estate tax law will return to the $1,000,000.00 estate, gift and GST tax exemptions of 2001, with a top tax rate of 55%.

If you have a Trust and if your net worth is over $1,000,000.00, it is time to review your estate plan. Everybody is different and your situation should be reviewed carefully by a qualified professional. Call us at 852-6000 to speak with an estate planning attorney.

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