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Roberts & Roberts, LLP

2501 E. Elms Rd., Ste. A, Killeen, TX 76542-3019 • (254) 526-7541 (phone) • (254) 526-5656 (fax) • www.robertslegalfirm.com


Introduction to the 2010 Estate Tax Rules

In the closing days of 2010, Congress took up the issue of extending the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 (the so-called "Bush Tax Cuts.") Under EGTRRA, the federal estate tax ("death tax") was repealed altogether in 2010, but then returned in 2011 to the pre-reform levels of 2001. Unfortunately, rather than developing a final set of rules Congress "kicked the can down the road" and passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, a temporary solution that will carry us through 2012. The current estate and gift tax provisions are summarized in the following table:

2009 2010 2011 2012 2013
Basic Exclusion Amount $3.5 Million $5 Million $5 Million $5 Million $1 Million
Lowest Gift & Estate Tax Rate 45%
 35%
 35%
 35%
 37%

Highest & Estate Tax Rate 45%
 35%
 35%
 35%
 55%

Annual Exclusion $13,000
 $13,000
 $13,000
 $13,000
 $13,000

Lifetime Gifts Exemption $1 Million
 $1 Million
 $5 Million
 $5 Million
 $1 Million

GST Exemption Amount Allowable $3.5 Million
 $5 Million
 $5 Million
 $5 Million
 $1 Million

GST Transfer Tax Rate 45% 0% 35% 35% 55%

Some significant changes were made to the law with respect to:

  • Portability of the spousal federal estate tax exemption. Under the new law a surviving spouse can choose to use the deceased spouse's unused exemption amount by simply making that election on a Federal Estate Tax return, without the need for complicated trust provisions.
  • Adjustment in the "basis" of the value of the decedent's assets.
  • Timing of large gifts, and gifts to grandchildren or certain other young people.

Obviously Congress will have to re-visit the issue sometime before 2013, but the ultimate resolution will likely depend as much on the state of the economy and the political party in power as any other factor. The current state of affairs will likely have CPAs and estate planning attorneys tied in knots for the next few years. Clients with estates large enough to be affected by these changes would be well-advised to monitor the situation carefully, and to schedule periodic estate plan reviews.

Roberts & Roberts provides legal services in the fields of real estate, probate, estate planning, business and family law. If you have questions about estate planning in Texas, or if you need an attorney in Killeen, Texas, we would welcome the opportunity to consult with you.

Roberts & Roberts, LLP