The 2010 tax year certainly proved to be a challenge for estate planners due to the uncertainty of the estate tax and the generation-skipping transfer (GST) tax. However, with the enactment of the 2010 Tax Act there is a least a little more certainty over the next couple of years.
The new $5 million gift tax and generation skipping transfer tax exemptions provide a powerful gifting opportunity for clients in the next two years. Because the $5 million exemption is scheduled to expire in 2013, it is important for advisors to understand the estate planning techniques that should be explored with their clients before the expiration of these high exemption amounts.
In addition to the increased exemption amount, the 2010 Tax Act includes a provision giving the executor of the estate of a first spouse to die the option of shifting any unused estate tax exemption amount to the surviving spouse. Thus, for example, if the first spouse used only $3,000,000 of his $5,000,000 exemption amount, his estate could elect to have the remaining $2,000,000 pass to the surviving spouse, giving her a total of $7,000,000 of estate tax exemption. Although this portability provision seems simple on the surface, it introduces important planning considerations that will be discussed during this session.
With a good fundamental understanding of the current gift and generation skipping transfer tax exemption rules, one will be able to identify significant opportunities to shift wealth to future generations.
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This post was written by Robert Keebler, CPA, MST, AEP and can be viewed here.