April 1, 2010
2010 and Beyond - The Transfer Tax Odyssey
Practical Tax Strategies
South Florida Private Wealth Services Team Chair Christopher Boyett and Partner Nichole Fitzgerald authored a Practical Tax Strategies article titled, "2010 and Beyond – The Transfer Tax Odyssey."
As a result of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the estate and generation-skipping transfer (GST) taxes are not applicable to decedent's dying and GST transfers taking place during 2010. The gift tax is applicable during that time period, but at a reduced rate of 35 percent. Subsequently, on January 1, 2011, the estate and GST taxes will be reinstated to how they were in 2001 (i.e., an estate tax exemption of $1 million and a top marginal rate of 55 percent).
This one-year estate tax repeal and scheduled return of archaic estate tax rules in 2011, combined with the possibility of Congress retroactively reinstating the estate and GST taxes to be the same as they were in 2009, has complicated estate planning among practitioners and clients alike.
In these uncertain transfer tax times, Mr. Boyett and Ms. Fitzgerald recommend that practitioners encourage clients to ensure that their existing estate plans are still viable in the event of their death in 2010. Additionally, while no one knows whether there will be legislation, retroactive or otherwise, in 2010 or whether that legislation will ultimately withstand constitutional challenge if it is retroactive, steps should be taken now to take advantage of the repeal of the estate and GST taxes and the lower gift tax rates.
As a result of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the estate and generation-skipping transfer (GST) taxes are not applicable to decedent's dying and GST transfers taking place during 2010. The gift tax is applicable during that time period, but at a reduced rate of 35 percent. Subsequently, on January 1, 2011, the estate and GST taxes will be reinstated to how they were in 2001 (i.e., an estate tax exemption of $1 million and a top marginal rate of 55 percent).
This one-year estate tax repeal and scheduled return of archaic estate tax rules in 2011, combined with the possibility of Congress retroactively reinstating the estate and GST taxes to be the same as they were in 2009, has complicated estate planning among practitioners and clients alike.
In these uncertain transfer tax times, Mr. Boyett and Ms. Fitzgerald recommend that practitioners encourage clients to ensure that their existing estate plans are still viable in the event of their death in 2010. Additionally, while no one knows whether there will be legislation, retroactive or otherwise, in 2010 or whether that legislation will ultimately withstand constitutional challenge if it is retroactive, steps should be taken now to take advantage of the repeal of the estate and GST taxes and the lower gift tax rates.