Estate Planning

Act Now to Save GST Tax - Expires 12/31/10

By Greg Herman-Giddens

On December 17, 2010 the President signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the 2010 Tax Relief Act), extending the Bush-era tax cuts. This new law creates a once-in-a-lifetime planning opportunity that ends at midnight, December 31, 2010.

The new law also presents additional planning opportunities that are less immediate, but no less important.

Background

Generally, transfers (greater than $13,000 per year) to generations younger than children are subject to what is known as the generation-skipping transfer tax, an onerous tax that equals the maximum gift or estate tax rate. The purpose of this tax, enacted in the late 1980s, is to prevent wealthy individuals from transferring assets to younger generations for the purpose of avoiding application of the estate tax at every generation.

A Unique Opportunity

The 2010 Tax Relief Act creates a unique opportunity to make gifts through December 31, 2010 that are not subject to the generation-skipping transfer tax. This is because, under the new law, the tax rate is zero for any generation-skipping transfer made in 2010.  Beginning January 1, 2011, the tax rate for these transfers will be 35%. In two short years the rate goes back to 55%.

Take Advantage of the Lowest Tax Rates in Decades

I urge you to consider taking advantage of this rare gift from Congress and consider making transfers to generations younger than children, even if you do not yet have grandchildren. An estate planning attorney can help you structure these gifts so that they meet your goals and objectives, regardless of amount.

Full post as published by North Carolina Estate Planning Blog on December 28, 2010 (boomark / email).