The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) repealed the federal estate and generation skipping transfer (GST) tax — but not the federal gift tax — for one year beginning January 1, 2010. Accordingly, there is currently no federal estate tax or GST tax in place for 2010. EGTRRA also included a "sunset" provision that eliminates all of the changes the Act made at the end of 2010. Consequently, in the absence of congressional action, the federal estate tax and GST tax law will revert to pre-2001 law with a $1 million estate exemption amount and a 55% maximum estate/gift rate. While Congress may act to change the federal estate tax during 2010, we cannot anticipate any legislative changes that might occur.
Here are a few important concepts to consider in 2010.
State Death Taxes
Most states impose some inheritance or death tax. We recommend that our clients consult with their tax and legal advisors regarding death taxes in their state of residence.
Gifting
Transfers of up to $13,000 per year, per individual, may be made by each spouse. This does not erode your $1,000,000 lifetime gift amount. Remember, on gifts made during your life, the recipient takes your cost basis. Inherited assets may be eligible for a limited increase in basis to date of death value.
