23 March 2018
As widely reported, the federal estate tax has been repealed for 2010, although many commentators expect the tax to be re-imposed retroactively. The impact of estate tax repeal on your estate plan, as well as possible planning opportunities for 2010, will require a conversation with your Withers Bergman attorney, but here are a few points to bear in mind:
The federal estate tax is repealed for at most one year. By 2011 it will again be important to take advantage of your estate tax exemptions, so the core of your estate plan likely should not change.
Depending on the formula used to divide your estate plan between the spousal share and the credit shelter/family share, your assets may not pass as expected while there is no estate tax. For estate plans that involve charitable bequests or second families it is particularly important to review your plans carefully.
Older plans for married couples will need to be amended in order to include basis allocation language. Failure to properly allocate basis may increase the capital gains tax your family pays in the future by $450,000 or more.
During 2010 there is still a state level estate tax in many states including New York, Connecticut, New Jersey and Massachusetts. State level tax may now be something worth planning to minimize or avoid. You may want to “decouple” your estate plan to avoid the state tax due on a first death. With state estate tax rates of up to 16%, this issue deserves a fresh review.
With a lower gift tax rate and no tax on generation skipping transfers this year you may have opportunities for lifetime planning. You need to consider the impact of the possibility of retroactive taxes on your proposed plan, and understand how the planning can be unwound if disadvantageous changes occur in the law. Developing a sufficiently flexible plan is particularly important in uncertain times.
We urge you to contact your attorney at Withers Bergman to discuss what steps you and your family need to take now!