The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was signed into law by President Barack Obama on Dec. 17. The bill extended the Bush tax cuts for another two years, but also provides some unique wealth management planning opportunities, according to Eido Walny, an estate planning attorney and partner with the Milwaukee law firm Gonzalez Saggio & Harlan LLP.
“The 2010 Tax Relief Act, as it has come to be known, sets the estate tax exclusion amount at $5 million per person with a maximum tax rate of 35% beyond the exclusion level,” Walny said. “This revised estate tax level provides tax payers with a higher exclusion amount than the $1 million per person level taxpayers would have faced in 2011 without this legislation and also reduces the tax rate that was scheduled to go to 55% without the new legislation. Perhaps more importantly, however, the 2010 Tax Relief Act introduces portability. Portability will allow a surviving spouse to take advantage of any unused exclusion amounts that his or her deceased spouse left at death. Portability will allow married couples to more easily shield up to $10 million from estate taxes than would otherwise have been the case.”
The new law has also enhanced gifting, Walny said. It has maintained the annual gift tax exclusion at $13,000 per person or $26,000 for married couples, per donee, but with some extra features.
“The new law reunifies the lifetime gift tax exclusion with the estate tax – that is to say that beyond the annual exclusion amount ($13,000), a donor could make additional gifts of up to $1 million over the course of his or her lifetime without incurring gift taxes for gifts made until December 31, 2010,” Walny said. “Beginning on January 1, 2011, however, that exclusion amount will rise to $5 million to match the estate tax exclusion level. Additional gifts beyond that will also be taxed at a 35% rate. For taxpayers who have maximized their lifetime gift tax exclusion, 2011 will avail an additional opportunity to gift up to $4 million without incurring gift tax (though no credit will be given to any previously taxable gifts made prior to 2011).”
