What the recent changes mean for 2011 estate taxes
If you have been following the estate tax changes since 2010, you are probably aware that there have been some changes to estate tax laws this year, and there might be more to come over the next few years.
Here are some ways that this year’s estate tax law changes can potentially impact your estate:
Portability
Under the extensions of the Bush-era tax cuts, spouses can now share their exemptions though what is commonly referred to as portability . This means that if one spouse only uses $2 million of their $5 million exemption before passing away, the other spouse is able to make use of the leftover $3 million in addition to their own $5 million for a total of $8 million worth of exemptions. However, if you are in the group that this change may affect, do not get overly excited – as of right now, these changes will only apply to spouses who pass away over the next two years.
Return of the Estate Tax
If someone passed away in 2010, their estate was not responsible for any estate taxes. However, the estate tax has returned in 2011, albeit at a lower rate than some anticipated. For those who pass away in 2011 and have estates worth more than $5 million, the tax rate will be 35%.
Gift Tax Reunified with Estate Tax
Exemptions and rates for gifts have been reunified with those for estates, making it a good idea for those with large estates to consider gifting some of their assets to their heirs as part of an estate planning strategy to minimize tax liabilities.
Don’t be afraid to ask for help
With the importance and complexity of these recent changes, don’t wait until it’s too late to create a plan to protect your assets. Contact us today at Northern Virginia Trusts & Estates if you have any questions at all or to take advantage of our offer for a free consultation.