Estate Planning Alert - Changes in Estate Taxes Effective for 2011

12.22.10

As 2010 comes to a close, Congress has finally delivered us some certainty as to estate taxes for the next couple of years in the form of the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010."

Effective for 2011 and 2012, the estate tax is reinstated with a top tax rate of 35% and an individual gift tax and estate tax exemption of $5 million which will be indexed to inflation in subsequent years.  This is quite a gift for taxpayers who were facing a top rate of 55% and an exemption amount of only $1 million on January 1, 2011 if Congress had not acted.  This is also a good deal as compared to the 2009 regime with a maximum estate tax rate of 45% and an exemption amount of $3.5 million ($1 million gift tax exemption). 

For those families who lost members in 2010, their estates will be able to choose to follow either the 2010 no estate tax regime or the 2011 regime.  An analysis of possible capital gains will need to be undertaken before making this choice.

Finally, the new legislation consists mostly of income tax provisions, including:

  • The 2010 ordinary income tax rates will be continued for 2011 and 2012;

  • The long-term capital gains tax rate and qualified dividend tax rate for 2011 and 2012 will be continued at 15%;

  • A one-year reduction in the FICA payroll tax for a regular employee from 6.2% to 4.2%; and

  • A corresponding one-year reduction in the FICA payroll tax rate for self-employed individuals from 12.4% to 10.4%.

While these are only a few of the income tax items, you can glean from this that the recent Act is taxpayer friendly.

Aronberg Goldgehn partner, Mary Vidal Hays, counsels individuals, representatives of trusts and estates, and businesses on a variety of estate planning issues. 

Aronberg Goldgehn partner, Blooma Stark, focuses her practice on estate planning and probate with particular emphasis in the areas of tax planning, asset protection planning and elder care planning.

If you have any questions on how the above may affect your estate plan, please contact Mary Vidal Hays at mhays@agdglaw.com or Blooma Stark at bstark@agdglaw.com



330 N. Wabash AvenueSuite 1700Chicago, Illinois 60611