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New Estate Law Legislation Enacted by Congress

Published on 01/12/2011

As of December 2010, US Congress was able to enact a new estate tax law for 2011 and 2012, which would set the per person exemption at $5 million, and place the top tax rate at 35 percent as part of the Obama tax deal. This action has allowed individuals a perfect opportunity to begin preparing a will and other estate planning documents.

The exemption will allow for successful individuals to simplify their estate planning by allowing them to simply leave their assets to their spouses. This is a large step away from bypass trusts, which had been a common means to bequeath loved ones with the estate assets.

Portability has also changed with the new tax law. For example, if a married individual dies in 2011 or 2012 and has not used their full $5 million exemption, whatever was unused from the exemption is passed to the individual's surviving spouse, which can translate to as much as $10 million free of estate tax for the survivor.

Older estate plans should be reviewed, as they were designed to place assets equal federal estate exemption go into a bypass trust for their children. However, with the new exemption, the surviving spouse could be left with nothing outside the trust, and individual retirement accounts, primary residences and other assets that are not placed in trusts for income tax reasons could be impacted as well.

To take advantage of the estate tax law, the basics for estate planning, such as the will, living will, health care proxy, and power of attorney, should be discussed with an attorney.

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