On December 17, 2010, President Obama signed “The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act which significantly altered the rules concerning federal estate taxes, gift taxes and generation-skipping transfer taxes for the 2010 through 2012 tax years. Once again the polarized Congress was incapable of reaching a bipartisan long term solution and instead bartered a short term “fix” that will expire at the end of 2012 unless Congress acts again to extend or further alter the current law. In on other words the exemption amount, which has been generously increased to $5 million for the years 2011 and 2012 will revert back to $1 million as of January 1, 2013 unless Congress acts! Obviously the intent is to leave this political “hot potato” on the table so that both sides can use it to their political advantage. You can expect the Republicans to continue to argue for a total repeal of “the Death Tax” and the Democrats countering with keeping the tax as a means of making the very rich “pay their fair share”.
The bottom line is that if you happen to die in 2011 or 2012, you can leave up to $5 Million to your beneficiary without having to pay any federal estate tax. And if you happen to be married, you can effectively transfer $10 Million to your beneficiaries, ($5 Million each) without the federal government taking a bite. Note that the exemption amount does include gifts made during the grantor’s lifetime. So, for the next two years almost everyone I know can breathe easy, but since there will have to be changes in the future, STAY TUNED!
