President Obama Signs Law Impacting Estate Plans
By: DAVID B. GOLLIN & CAMERON R. SEYBOLT
January 2011
On December 17, 2010, the President signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. This new law makes several changes that may affect your estate planning. Among the key provisions of the new law are the following:
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Increased Federal Estate Tax Exemption. The federal estate tax exemption is increased to $5,000,000 per person for 2011 and 2012. The Minnesota estate tax exemption remains at $1,000,000.
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“Portability” of Estate Tax Exemption. The unused portion of a person’s federal estate tax exemption may be “rolled-over” and used by his or her surviving spouse, but only if the survivor’s death occurs in 2011 or 2012. Minnesota law does not include a similar concept.
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Increased Gift Tax Exemption. The lifetime gift tax exemption is also increased to $5,000,000 per person for gifts made in 2011 and 2012. There is currently no Minnesota gift tax.
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Decreased Federal Estate and Gift Tax Rates. The federal gift and estate tax rates are reduced to 35% for the years 2011 and 2012. For Minnesota residents (and non-residents owning Minnesota property), the top combined state and federal estate tax rate is 45.4%.
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Increased GST Tax Exemption / Reduced GST Tax Rate. The generation-skipping transfer tax exemption is increased to $5,000,000 per person in 2010, 2011, and 2012. In addition, the GST tax rate is decreased to 35% for 2011 and 2012.
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Income Tax Provisions. The reduced income tax rates enacted in 2001 (including top marginal rates of 35% on ordinary income and 15% on capital gains and qualified dividends) are extended through 2012.
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Charitable Gifts from IRAs. The law reinstates the opportunity for owners of Individual Retirement Accounts who have attained the age of 70½ to make charitable gifts totaling up to $100,000 per year directly from their IRAs (rather than withdrawing cash from the account and then transferring it to a charity) for 2010 and 2011, and allows gifts made by January 31, 2011 to be treated as a 2010 donation.
We expect many of our clients will want to revise their estate planning documents to address these changes. In addition, the new law creates significant lifetime planning opportunities, but only for a limited time. If you would like to discuss how the new law affects you, please contact a member of Fredrikson & Byron’s Trusts & Estates practice group.