First we predicted that the Congress would not fail to amend the expiring estate tax provisions; then 2010 arrived and the sunset of the 2001 – 2009 tax law came with nothing having been done. The elections of 2010 seemed to place the House and Senate on opposite sides of the issue, with President Obama insisting the rich be required to give up half their assets. We predicted a deadlock on the extension of the “Bush tax cuts,” and nothing would be done. Wrong again.
Now, if you are single and have a net worth including death benefits from personally owned life insurance, group life and retirement plans of ALL types of over $5 million, then you are subject to estate tax. The rate is 35% of the excess. NOTE: your proper administrative costs are also deductible, so if you are just over, your estate isn’t likely to suffer the tax.
If you are married, your tax situation improves if you are leaving assets to your spouse. There is no tax on assets left to a spouse – or those provided as gifts to a spouse during lifetime. If a well considered trust is created, a married person can create benefits for a surviving spouse and children, and exempt a total of $10 million – $5 million for each spouse.
Estimates are that less than 1% of residents to whom this law applies will actually be taxable. The gift and estate tax combined has never raised over 6% of the Federal Budget. It has remained conceptually one of the more irritating taxes ever imposed, even for those whom it does not affect.