Congress and the President approved the new tax act last week. One of the biggest changes is to the federal estate tax law.
The new rules change the federal estate tax exemption beginning in 2011 to $5 million for a single person, and $10 million for a married couple. Amounts in excess of the exemption are taxed at a flat rate of 35%.
The lifetime gift tax exemption has also been increased to $5 million, effective 1/1/2011.
For estate planning attorneys, the new tax act is a reason to get together with clients with estate tax management documents. The new law creates special opportunities and circumstances that some may want to take advantage of. For example, with portable high exemption amounts, married clients may want to consider leaving bigger inheritances for surviving spouses.
Life insurance and financial professionals also have things they should discuss with their high net worth clients. For example, those who have considered or implemented irrevocable life insurance trusts (ILITs) in the past may want to reconsider their strategies going forward. Also, those who struggled with naming beneficiaries for qualified accounts–such as pensions or IRAs–may now have more flexible choices in that regard.