The recently enacted tax law has many provisions that all need to be aware
of. While we need to know that these changes exist, we may not need to know the
details of all of them.
We should all be familiar with the estate tax law changes that follow:
The estate tax credit equivalent has been change to an exclusion and the
brackets have been changed to:
| 2002-2003 |
$1,000,000.00 |
| 2004-2005 |
$1,500,000.00 |
| 2006-2008 |
$2,000,000.00 |
| 2009 |
$3,500,000.00 |
| 2010 |
Repeal |
| 2011 |
$1,000,000.00 |
The top estate tax rate will also be reduced gradually as follows:
| 2002 |
50% |
| 2003 |
49% |
| 2004 |
48% |
| 2005 |
47% |
| 2006 |
46% |
| 2007-2009 |
45% |
| 2010 |
Repeal |
| 2011 |
55% |
After repeal (2010 only) the step up in basis provisions we currently enjoy
are gone. In their place will be a step up in basis for $1,300,000 of the
estate’s assets. All other assets will pass to the heirs at the deceased
adjusted basis. If the spouse is the heir, an additional $3,000,000 of assets
may be transferred with a step up in basis.
Gift tax laws are also changed. The annual $10,000.00 exclusion remains.
After 2009 (repeal of estate tax in 2010) the gift tax has a one time gift
maximum exclusion of $1,000,000. The tax rate on gifts will be the maximum
individual income tax rate in effect in the year of the gift (currently that
would be 35%).
