New Estate Tax is Now Law

3:21 pm Uncategorized

President Obama signed the $858 billion tax bill into law earlier today, which includes not only the extension of the Bush Tax Cuts to all taxpayers for the next two years, but also institutes a new estate tax of 35 percent with a $5 million exemption per individual effective Jan. 1, 2011.

The tax bill also confirmed a zero percent generation-skipping tax rate for 2010.  If you contributed money to a trust for grandchildren in 2010, that also qualifies for the zero percent rate.  And there’s more.

As Janet Novak explained in her blog post yesterday, the new legislation creates an additional loophole:

The new loophole is this: the money doesn’t (as most planners had believed) have to be distributed outright to the grandkids to qualify for the 0% rate.  Instead, according to the fine print in the tax deal, it can be put in a trust for them. That means that money can be taken from an existing multigenerational trust, declared subject to the 2010 GST tax, and deposited in a new trust for grandkids’ benefit, with the GST tax now pre-paid at a 0% rate. Transferring money to a new trust answers worries that the grandkids might lose the cash to creditors or in a messy divorce, or blow it on, say, a $2.6 million Bugatti sports car.

This loophole expires on December 31, 2010, so those who see an opportunity here should contact our California estate planning law firm now.

Get started by contacting our Orange County asset protection estate planning law firm as soon as possible.

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