Senate Majority Leader Intros Bill for Obama-Republican Deal

2:09 pm Uncategorized

Senate Majority Leader Harry Reid (D-NV) introduced legislation yesterday for the Obama-Republican deal as an amendment to the Middle Class Tax Act of 2010.

The legislation contained some surprises for wealth transfer taxes.  From an article at Forbes.com, here is a summary of the changes to the estate tax by the Senate Committee on Finance:

Temporary estate, gift and generation skipping transfer tax relief. The EGTRRA phased-out the estate and generation-skipping transfer taxes so that they were fully repealed in 2010, and lowered the gift tax rate to 35 percent and increased the gift tax exemption to $1 million for 2010. The proposal sets the exemption at $5 million per person and $10 million per couple and a top tax rate of 35 percent for the estate, gift, and generation skipping transfer taxes for two years, through 2012. The exemption amount is indexed beginning in 2012. The proposal is effective January 1, 2010, but allows an election to choose no estate tax and modified carryover basis for estates arising on or after January 1, 2010 and before January 1, 2011. The proposal sets a $5 million generation-skipping transfer tax exemption and zero percent rate for the 2010 year.

Portability of unused exemption. Under current law, couples have to do complicated estate planning to claim their entire exemption (currently $7 million for a couple). The proposal allows the executor of a deceased spouse’s estate to transfer any unused exemption to the surviving spouse without such planning. The proposal is effective for estates of decedents dying after December 31, 2010.

Reunification. Prior to the EGTRRA, the estate and gift taxes were unified, creating a single graduated rate schedule for both. That single lifetime exemption could be used for gifts and/or bequests. The EGTRRA decoupled these systems. The proposal reunifies the estate and gift taxes. The proposal is effective for gifts made after December 31, 2010.

If the bill becomes law, 2011 will be a banner year for the transfer of wealth from one generation to the next.

If you have questions about wealth transfer, asset protection or estate planning, contact our California estate planning law firm.

Contact us today for individualized planning strategies to meet your unique needs.

Leave a Comment

Your comment

You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Please note: Comment moderation is enabled and may delay your comment. There is no need to resubmit your comment.