“Death of the Federal Estate Tax” may seem a bit dramatic, but at least for the tax year 2010, the estate tax is no longer.
A law passed in 2001 under the Bush administration calling for a gradual increase in the amount of money that could be exempted from the federal estate tax. Part of the law comes into play this year with the federal estate tax officially suspended for 2010—all 55 % of it. Absent further legislation, it goes back into effect in 2011. But for now at least, the Federal Estate Tax is no longer.
What is the Estate Tax?
The Internal Revenue Service (IRS) defines the estate tax as a tax on your right to transfer property at your death. Property includes cash and securities, real estate, insurance, trusts, annuities, business interests and other assets that are part of your estate, the net worth of which is based on Fair Market Value (FMV).
What does this mean for the average taxpayer? Not a whole lot. According to IRS regulations, only those with combined gross assets and prior taxable gifts exceeding $3.5 million would be impacted by the estate tax. And in 2010, even those folks are exempt—
but when it comes to taxes, things are never as simple as they may seem.
For those who have amassed over $3.5 million in assets, much of their estate planning has been built around that 55% Federal Estate Tax. For better or worse, the 2010 suspension has thrown kinks into many Wills and Living Trusts.
Should I Rewrite My Will?
Keeping your estate plan current is essential. While your financial advisor is the best resource when it comes to understanding the Federal Estate Tax suspension, you are the best resource when it comes to life changes and updating a Will or Living Trust to reflect those. Be sure your Will or Living Trust is up to date, regardless of the Estate Tax or how many assets you think you have (or don't have.) It's the best way to safeguard your family and your belongings.
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