We recently passed along the news about the changes in the estate tax parameters that will be in effect going forward after the new tax legislation that was signed into law on December 17, 2010. To recap briefly, the estate tax had been scheduled to reappear after a one-year repeal in 2011 with an exclusion of $1 million and a top rate of 55%. Many people took exception to these numbers because they represented a huge step backward from the $3.5 million exclusion and 45% rate of taxation that existed when the tax was last in effect in 2009.
There were discussions throughout the year about changing the tax laws to ease this rather draconian estate tax bite. Though a lot of us have become rather jaded about such matters, once in a while common sense does win out. The powers that be in Washington did indeed enact legislation that raises the exclusion to $5 million for 2011 and 2012 while reducing the maximum rate of taxation to 35%.
To get back to the matter of common sense, previous to 2011 the estate tax exclusion was not portable. In other words, if you passed away without using up your allotted estate tax exclusion it simply died along with you. Throughout your life you and your spouse were engaged in a financial partnership, so whatever he or she is left with after your death is the product of your joint efforts. Yet, your surviving spouse was not allowed to use your estate tax exclusion even though you earned some or perhaps most or even all of the taxable assets.
Fortunately, this is no longer the case. One of the provisions of the new tax legislation provides for the portability of the individual estate tax exclusion between married partners. Once again, this is an example of pure common sense holding sway over partisan finger pointing used by some to divide Americans along economic lines for the purposes of political expediency.
- It Can Be Scary to Die Without an Estate Plan…the HORRORS of Intestacy - December 23, 2021
- Neither Age Nor Health Determines Whether You Need an Estate Plan - December 21, 2021
- The Role of the Estate Planning Attorney - December 8, 2021
