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Federal Estate and Gift Taxes: On June 7, 2001, President George W. Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001. What does this mean to taxpayers? For most people, the estate tax repeal will be felt when government revenue must be raised from some other source - possibly including taxes on middle class citizens who wouldn't have paid estate taxes under the old rules. For the remaining people, the change in tax laws will mean they must spend more on lawyer's fees for changes to their estate plans - and may have to make more than one set of changes as the rules slowly shift over the next decade. What exactly will happen over upcoming years is difficult to predict exactly due to the four (4) elements of estate tax repeal. They are as follows: Reductions in the estate tax will be phased in over a ten (10) year period. The current exemption from federal estate tax liability for the year 2008 is $2,000,000.00 and will then increase slowly up until the year 2010 when the estate tax is repealed. In the year 2011, the estate tax will be reinstated with the exemption to be $1,000,000.00 per person. The top tax rate will drop slightly each year, currently the top tax rate is at fifty-five (55%) percent and will drop to forty-five (45%) percent before the tax is finally eliminated. A new system of taxation will be imposed upon repeal of the estate tax. Heirs will pay income taxes on capital gains when they sell inherited property. A $1,300,000.00 of gain for every decedent's estate and another $1,000,000.00 of gain for surviving spouses is set as the exclusion, which is quite substantial. |
Gift Tax Exclusion: |