In 2009 the estate tax exclusion increased to $3.5M. What does this mean to you?
Very few people will be subject to the federal estate
tax. Some studies (before the market and economic meltdown) suggested that
$3.5 net worth puts you in the wealthiest 1% of families. So, with a $3.5M
exclusion few people should fall prey to sales pitches for products or
documents to avoid an estate tax they won't pay.
Many states still have estate and inheritance taxes,
so some planning may still be in order.
You still have to balance income and estate tax
considerations. Example: Assets held until death get a step up in tax
You MUST revise your will! If you left assets to a
bypass trust when the exclusion was $600,000 or $1M you could face a
substantial state estate tax if that trust is funded to the full federal
exclusion of $3.5M if you are domiciled in a state that has a lower
exclusion. In New Jersey for example, the state tax would be $229,200. That
is a lot of money to fund a trust that many people will no longer
Review how trusts under your will or revocable living
trust will be funded in the new regime. You might have left $600,000 to a
bypass trust for the children of a prior marriage with the rest outright to
your current spouse. With a $3.5M exclusion your current spouse may get
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