By: Martin M. Shenkman, CPA, MBA, JD
Senate Passes an Estate Tax Bill
Money Matters Radio – Estate Planning Q&A with Gary Goldberg
Introduction/Overview: Late Thursday last week the Senate passed The passed Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 which provides for a $5M gift, estate and GST tax exclusion.
√ Question: Why do tax bills always have long and ridiculous sounding names?
√ Answer: Great question!
√ Question: So can anyone with an estate under $5M just prepare their will on line and stop planning?
√ Answer: Sure, if they want more headaches down the road. First estate planning was never only about taxes. Estate planning must protect people in the event of disability, it must address family issues, insurance coverage, financial and retirement considerations and a myriad of other issues. A $99 will form on a website won’t accomplish any of that. And as for taxes, the Senate proposal appears to only extend the tax benefits to the end of 2012. We might have another guessing game then just like 2010.
√ Question: What happens to the tax situation faced by estates in of those who died in 2010?
√ Answer: The bill permits executors of decedents who died in 2010 to choose whether the estate will be subject to the new estate tax rules with a $5 million exclusion or carryover basis. This is simply a give away to the wealthy since it is even more lucrative than the law in 2009 that everyone thought would be used as a paradigm.
√ Question: What should people do before year end?
√ Answer: Make gifts to use up your 2010 gift exclusion if you can afford to. Also if you have adult grandchildren consider gifts directly to them. If there are trusts that are not GST exempt you should evaluate distributions from them to adult grandchildren since there is no tax in 2010.
√ Question: Any new estate tax planning ideas from the new Bill?
√ Answer: The Senate bill creates a new concept called “portability.” If you’re married the surviving spouse may be able to use the $5M exclusion from the first spouse to die. So here’s the planning idea… a new website called e-tax harmony.com. Every single elderly widow or widower might evaluate marrying someone really old who has no money! The Bill provides for portability. The estate tax exclusion of your spouse if they don’t use it. So if you’re single and older get an older poor spouse and
√ Question: So will this Bill pass?
√ Answer: I don’t have my Ouija board here but something pretty close to it is likely.
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