Summary of Estate Tax Law Changes

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%).