Gift and Estate Tax Reform

If the Obama-Republican compromise passes the Congress,  it could be the best year for the wealthy.  If the deal that was negotiated by President, while excluding House Democrats from the negotiations, goes through as proposes, it would mean that for majority of average Americans  the estate tax would become even less of a problem.  The proposed bill calls for the following;

- 35% maximum estate-tax rate

- $5 million exclusion for individuals; $10 million for married couples

- Stepped-up basis for "all assets included in the gross estate"

- Repeal of carryover basis (used in 2010 on capital gains in estates)

- Heirs can choose, for those who died during 2010, "carryover basis rules under EGTRRA or the revived stepped-up basis rules under the bill"

- Spouses can choose to use the "unused portion of the estate tax exclusion," of the spouse who died before them

In addition, for the Generation-Skipping Gift Tax for 2010, the Senate bill provides for a zero percent GST rate for 2010 and a $5 million exemption.  For 2011, the pending bill reunifies the gift and the estate taxes, the rates for 2011 and 2012 would match "the maximum estate tax rates and exclusion," or 35% and a $5 million exclusion.

Notwithstanding the foregoing, the upper-income Americans should still take advantage of of gifting strategies and to reduce their taxable estates by utilizing annual gift exclusion, which is $13,000 in 2010.

The following are the links to the selection of the various media coverage of the foregoing issues:

The Gift Tax: Use It or Lose It

Reid Bill Passes Senate's Procedural Vote: Estate Tax At 35% Tax Rate, $5M Exemption Is Likely

Estate Tax Reform: Harold Evensky and Diahann Lassus Weigh In

Posted by Mariya V. Link, Associate Editor, Wealth Strategies Journal