 |
|||||||||||||||
 |
|||||||||||||||
 |
|||||||||||||||
 |
|||||||||||||||
|
|||||||||||||||
 |
|||||||||||||||
 |
|||||||||||||||
 |
 |
 |
 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Recent Changes to Estate and Gift Tax Laws The recently enacted estate, generation skipping, and gift tax legislation creates three different tax periods. In addition, the concept of "Unification" of the gift and estate taxes, which has existed for the past 25 years, is radically being changed. The first period begins January 1, 2002 and runs through December 31, 2009. As you can see from the chart below, the estate and generation skipping tax exemptions increase significantly. This change will result in most estates that under current law would owe tax, being exempt from tax and federal filing requirements. During this period, the gift tax exemption remains constant at $1,000,000. Congress is concerned that if the gift tax exemption was significantly increased and ultimately repealed, that taxpayers would gift property to family members in lower income tax brackets, the property would be sold, and the proceeds would then be gifted back to the original grantor. The second period is only for the year 2010. During this year, the estate and generation skipping taxes are repealed. The third period is 2011 and thereafter. If a new law is not passed by December 31, 2010, the current law is reinstated. There is also a change to the State Death Tax Credit for estate taxes paid to states. The Credit is being reduced in stages between 2002 through 2004. Starting in 2005 the Credit is repealed and replaced by a deduction. At this time we do not know how states will respond to the resulting decrease in revenue that will result from this change. The last significant change occurs in 2010. At that time (and thereafter) property inherited will no longer be "stepped-up" with respect to the date of death (or alternate valuation) value for subsequent income taxes transactions. Most commentators believe that this will be repealed. A similar law was passed in 1976 and was repealed retroactively in 1977. However, in the event it is not repealed, it is importantto maintain records of the cost basis of all assets. There are limited modifications to the new rules for assets passing to the spouse (up to $3,000,000 for possible additional basis increases) and to all other property passing to beneficiaries up to an aggregate of $1,300,000. If the carry over basis provisions remain in the law, all Wills and estate plans will have to be revised to insure the benefits of the exceptions. Many Wills have been drafted with formula clauses to take advantage of the estate tax unified credit. They automatically self adjust to take advantage of the applicable credit in the year of death. These type of Wills should be reviewed to make sure that an unintended amount resulting from the increases in the credit does go into the trust or to named beneficiaries. Most Wills do not have to be changed. We would be happy to review your existing Wills to make sure that your assets are passing in accordance with your wishes. If your Will is more than ten years old, it should be reviewed in any event.
© 2001 Davis & Gilbert LLP |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Davis & Gilbert LLP • 1740 Broadway • New York, NY 10019 tel: 212.468.4800 • fax: 212.468.4888 |
|
| Privacy Policy • Terms & Conditions |