In 2010, President Obama created the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act (TRA 2010) that affects the federal estate taxes, generation-skipping transfer taxes, and gift taxes for the tax years from 2010 to 2012. It is expected that federal estate tax laws will be modified in 2013 back to the laws that were in effect in 2002, which will increase estate tax rates and drop exemption dollar amounts.
So for the remainder of 2011 and 2012, individuals should get their estates in order. TRA 2010 lets married couples have portability of the federal estate tax exemption when their spouse passes away in 2011 and 2012. The surviving spouse can get any unused amount of the estate tax exemption from the deceased spouse, which thereby allows $10 million to be passed to heirs without estate taxes.
Also, when property, stocks, or cash is transferred to another as a gift, the donor is responsible for paying a federal gift tax. An individual can gift up to $13,000 and spouses can gift up to $26,000 without having to pay this tax. A gift tax is only triggered if a lifetime gift amount to non-spouse heirs totals more than $5 million for 2011.
Sometimes an individual wants to transfer property to a relative that is two or more levels below the transferor’s generation. The transferor is responsible for paying a generation skipping transfer tax unless certain exemptions are met.
Before a loved one passes away, it is important to seek experienced legal counsel to advise on these matters to ensure than an estate is not excessively taxed and that heirs are taken care of according to the person’s last wishes. The 2011 and 2012 rules are more favorable, so individuals need to be proactive about their estate plans now.
Littman Krooks LLP counsels individuals and families to minimize taxes, probate expenses, and carry out the legacy they want to leave to their beneficiaries. Our New York City, White Plains and Fishkill estate planning attorneys and elder law attorneys are accomplished in asset preservation, trusts, and estate planning.
To learn more about New York estate planning, visit http://www.littmankrooks.com/estate-planning/.