BEST FINANCIAL ADVISORS OF U.S.

As of Jan. 1, there is no federal estate tax and a reduction in the number of taxable estates in the US.

Unfortunately, the clock is ticking on this federal tax hiatus, and the alarm may sound before the year is over.

In 2001, when any estate more than $675,000 was taxed, Congress passed tax cuts that gradually decreased the amount of estate tax payable by the estates of those dying over the following eight years.

These tax cuts increased the federal exemption to $3.5 million in 2009, eventually culminating in the temporary elimination of federal estate taxes for estates of those dying in 2010.

The bill passed in 2001 had a sunset provision, whereby the law ends at the end of this year.

In 2011, the estate tax comes back for estates of $1 million or greater, at a maximum rate of 55 percent, if Congress does not act before the end of this year.

In December of 2009, the House of Representatives passed a bill that would have halted this year’s temporary removal of the federal estate tax, reinstating last year’s levels for another year.

The Senate, however, didn’t yet vote on it.

The House has introduced a new bill which would make last year’s $3.5 million exemption permanent and cap the top rate at 45 percent. This new bill is waiting for the Senate’s approval.

If this bill were to be passed, it would be retroactive to Jan. 1, 2010. The one thing that never changes, however, is that a bequest to a spouse or to a charity would not be taxed.

Tags: Estate Tax Planning

This entry was posted on Thursday, January 21st, 2010 at 10:13 am and is filed under Finding The Best Financial Advisor. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.