On December 6, 2010, President Obama announced a tentative deal with Congressional Republicans to extend the Bush-era tax cuts at all income levels for two years. This package would also keep benefits flowing to the long-term unemployed, cut payroll taxes for all workers for a year and take other steps to bolster the economy. Included in this deal is that the estate tax would come back in 2011, but at an exemption and rate that many Republicans have been arguing for. Under the deal, the estate tax exemption would be up to $5 million for individuals and $10 million for couples. The tax rate would be at 35%. The exemption and rate would be in effect for two years. Full press release: pbs.org.
The Bush Administration estate tax cuts are set to expire on December 31, 2010. These tax cuts were enacted in 2001 and 2003. Over course of nine years, the estate tax has allowed for more individuals to qualify for an exemption, and their taxable estate to be taxed at a lower rate. With the Bush Administration estate tax set to expire at the end of this year, many anticipated returning to a higher estate tax rate. Obama has, in essence, renewed the Bush-era tax cuts, setting the estate tax at 35% for two years, with a $5 million exemption on assets that is higher than last year’s $3.5 million. The rate came down under Bush’s policy from 55% before 2001 to 45% in 2009 before expiring this year. It was set to return at 55% next year.
For questions regarding estate planning, please contact an attorney at the Leeds Morelli & Brown P.C. law firm for a free consultation at 1-888-556-2529 or visit the firm’s website at www.lbestatelaw.com.