Hurry up and die and save your family thousands of dollars. It’s something to think about in these tough economic times of uncertainty. Let me explain.
This year, the federal estate exemption has jumped to a whopping $3.5 million. That means, if you are one of the lucky ones not to have lost every red cent to the Bernie Madoff and Allen Stanford ponzi schemes of this world, you can pass along $3.5 million to your heirs free of federal estate tax. (Anything over that amount faces a federal estate tax of 45%.)
You can always leave your deserving spouse an unlimited amount of assets free of federal estate tax but let’s assume that you are one of the really, really lucky ones and you and your loving spouse are worth a whole lot more than a paltry $3.5 million. One estate planning device that you could use is called a bypass trust whereby, upon your death, you place up to the exemption amount (that’s the $3.5 million in 2009) into a trust and your spouse and/or other beneficiaries can reap the rewards of that trust, via its income and principal (and expected increase in value) without worrying about federal tax on it when the second spouse dies. Whew, that sounds really good, right?
Well, here’s the better news……………if you die in 2010 (you must plan very carefully now), you won’t have to worry about any estate tax, at all, on ANYTHING. Yes, you heard me right. Federal lawmakers, in their infinite wisdom, drafted estate tax legislation that essentially evaporates in 2010. That means you can pass along an unlimited amount of assets to ANYONE (including yours truly), and not worry about one red cent of federal estate taxes. Talk about advanced estate directives! This is way better than pre-paying your funeral!
This estate tax black hole will have a very short lifespan so plan accordingly. By 2011, the federal estate tax comes back in a big way, at a whopping 55%, and the exemption falls back to $1 million dollars.
A good article in yesterday’s New York Times
outlined some standard estate planning vehicles. However, there is nothing standard in these times of uncertainty and you should take the time to review your estate plan now……and then again……after Congress decides what to do in 2010.
The new messiah of Washington, that would be President Obama, says it’s a top priority of his administration (oh my, he has soooo many priorities) to make the estate tax permanent and avoid this 2010 quagmire. He is pushing ahead at quite a brisk pace but wealthy Republicans who are planning to die in 2010 may not let him get away with this. He is trying to tax them for everything and now he wants to chase them into their graves.
Congress has a lot on its agenda this year. Universal health care, electronic health records, withdrawing troops from Iraq……….and now, the estate tax. As Ben Franklin once said………the only things certain in life are death and taxes!