As we draw closer to the end of the year, Congress is working to resolve the issue of tax cuts and the federal estate tax exemption. Within the last few days, President Obama announced that the administration and the Republicans had arrived at a proposal for a bipartisan agreement that would extend the Bush-era tax cuts and give workers a 2% reduction in Social Secuirry Tax for 2011.
Although details have not yet been made public, it is believed that the bill will reinstate the federal estate tax with a $5 million exemption amount and a top tax rate of 35%. What this means in laymen terms is that estates over $5 million will be taxed at a rate of 35%. Other aspects of the agreement would allow businesses to write off 100% of their equipment and machinery purchases during 2011, extending unemployment benefits for 13 months, and retaining “key tax cuts” for working families.
What Congress does will determine how estate planners address their clients’ estate plans. As past blogs have reported, 2010 was a year when there was no estate tax at all. Without action by Congress, the federal estate tax exemption is due to return to a level of $1 million. Many California residents have a gross estate of $1 million and need to be concerned about estate taxes if Congress doesn’t act and they should happen to pass away in 2011.
At Scott C. Soady, A Professional Corporation, we are ready to address your estate planning concerns for the coming year, no matter what Congress does. If you have not created an estate plan, preferably a revocable living trust, creating one should be on the top of your To Do list for 2011. Your initial consultation is complimentary so call us to schedule your appointment.