FLASH - December 9 Senate Estate Tax Proposal

12/10/2010

Here are the most significant estate, gift, and generation-skipping tax features of the Tax Bill introduced in the Senate yesterday: 

  • The estate of an individual who died in 2010 can elect the 2011 rules ($5,000,000 exemption and top estate tax rate of 35%) or the "repeal" provisions (no estate tax but special rules for limited increase in the income tax basis of the assets of the decedent). 
  • For the estate of anyone dying in 2010, the time for filing the estate tax return will be extended until at least nine months after the date of enactment (at least until the end of September 2011). 
  • Gifts during 2010 continue to have a $1,000,000 exemption and 35% top tax rate; generation-skipping transfer tax ("GSTT") exemption is $5,000,000 for 2010. 
  • Rules beginning January 1, 2011: 
    • $5,000,000 estate and gift tax exemption, indexed for inflation after 2011. 
    • GSTT exemption is $5,000,000. 
    • Top tax rate of 35%. 
    • New rules only apply to 2011 and 2012. 
    • If no additional legislation is enacted, on January 1, 2013, gift and estate tax exemption reverts to $1,000,000, and GSTT exemption reverts to $1,360,000, with a top tax rate of 55% (60% for estates between $10,000,000 and $20,000,000). 
  • Generation-skipping transfers during 2010, whether outright or in trust, are exempt, and later distributions from new 2010 trusts to the oldest beneficiary continue to be exempt (a future alert will expand on planning opportunities). 
  • No requirement of a minimum 10-year term for a grantor retained annuity trust ("GRAT") or restrictions on discounts for family-owned businesses. 
  • Reinstatement of $100,000 IRA charitable contributions for individuals over age 70-1/2 for 2010 and 2011.

If you have any questions, please feel free to contact one of the attorneys listed below.

To ensure compliance with requirements imposed by U.S. Treasury Regulations, Haynes and Boone, LLP informs you that any U.S. tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

*Board Certified – Estate Planning and Probate Law and Tax Law by the Texas Board of Legal Specialization.

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