Many people are aware of the fact that the federal estate tax was repealed for 2010 via the 2001 tax relief act, but it is scheduled to return in 2011 with some changes from the last time we saw it back in 2009. We include the caveat “scheduled” above because there is a lot of debate surrounding the details of the 2011 estate tax as it stands right now and alternative legislation has been proposed. But if nothing changes, the exemption amount will drop from the 2009 level of $3.5 million all the way down to just $1 million. To ratchet up the pain just a little bit more, the top rate of taxation will rise from a harsh 45% up to a stifling 55%.
The exemption amount was $2 million from 2006 through 2008, so if you have planned your estate anticipating an exemption of at least two million dollars you may want to revisit your plan and take action if necessary. This change is really profound because rather that targeting those who could be described as at least moderately wealthy with the $3.5 million threshold, the one million dollar exclusion reaches many people who would say that they were of ordinary means. If you bought your house 30 or 40 years ago, had a 401(k), some additional retirement savings, and a few modest investments like most American your estate may well be valued in excess of $1 million and subject to the estate tax.
With this revised estate tax looming over the horizon and the possibility of some last minute legislative adjustments lingering as well, it may be a good time to speak with an estate planning professional. If you would like to discuss how the 2011 estate tax may impact your legacy, feel free to give us a call at (904) 215-3550 to arrange for a free consultation.