Tax Relief Act of 2010: Estate Tax Relief Through 2012

On December 9, Senate Majority Leader Harry Reid (D-NV) introduced H.R. 4853, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Tax Relief Act). The Tax Relief Act contains a two-year extension of the Bush-era tax cuts that was negotiated by the President and Republicans, and significant estate tax relief. However, it also contains a trove of other tax breaks for businesses and individuals. One area of tax-cuts returning under this agreement applies to estate taxes.

The estate tax returns after 2010 and before 2012, but with the following changes:

· A $5 million unified and indexed exemption amount ($10million for couples).

· The top tax rate will be 35% for estate, gift, and generation skipping transfer taxes.

· Reunification of estate and gift taxes, effective for gifts made after December 31, 2010.

· An election will allow the choice of no estate tax and modified carryover basis for estates arising on or after Jan. 1, 2010 and before Jan. 1, 2011. There will be a $5 million generation-skipping transfer tax exemption and zero percent rate for the 2010 year.

· Effective for estates of decedents dying after Dec. 31, 2010, the executor of a deceased spouse’s estate will be able to transfer any unused exemption to the surviving spouse.

We would be happy to answer any questions you  may have about estate taxes.

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