Two Years Can Last Forever - Planning Under the New Act

The so called Bush era tax cuts (enacted through the Economic Growth and Tax Relief Reconciliation Act of 2001) substantially increased the credit exemption amount available to estates over time and reduced the top marginal rate applied to taxable estates pushing toward eventual repeal of the federal estate tax.

In 2010, we saw the unthinkable: estate tax repeal. Throughout the year, planners believed there may be retroactive legislation that would reenact the estate tax. People feared it could be taken away at any time. Some planners even suggested that it might be advisable to have clients make taxable gifts to take advantage of the 35% gift tax rate.

In response to the chaos created by the one year of estate tax repeal and then the return to the tax laws that existed before the Bush era tax cuts, Congress enacted and on December 17, 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“2010 Tax Act”). The 2010 Tax Act made significant changes to the estate, gift and generation-skipping transfer (“GST”) tax laws. These changes will remain in place for two years, 2011 and 2012, but can have an impact that lasts forever.