A new year often comes with fresh beginnings. Sometimes it comes with uncertainty and questions about what the next year will bring. After reviewing the 2010 Tax Act and pondering it for a few weeks, we’ve come up with several questions that we and our clients are asking as we enter into 2011.
1. Should you stop making any additional 2010 annual gifts ($13,000, tuition and medical) because the $5 million exclusion in 2011 will mean that the estate tax will never apply to you?
2. Or, should you aggressively plan gifts soon because in 2013 the estate tax law is supposed to revert to a $1 million estate exemption and 55% rate?
3. What if your plan had the maximum amount that could pass free of estate tax passing to children from a previous marriage and not your spouse? That amount may now be up to $5 million for the next two years. Is that consistent with your wishes?
4. If you concluded that your children should not receive all of your estate, and so your plan provides that any amount that can pass estate tax free and any excess go to charity, what does the new exemption amount do to your wishes to set a cap on how much children receive?
Note of Caution: The law, and planning based on the law, still remains uncertain with many variables. This creates both risks and opportunities that you need to weigh with your advisors. Call or email us if we can help.