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McCurrie McCurrie
& McCurrie, L.L.C.

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With Estate Tax Set to Return, Now is the Time for an Estate Plan

As we approach the end of 2010, a number of very interesting estate planning issues are being presented around the subject of the federal estate tax - or the absence of such a tax. Dubbed by some as the "death tax," the estate tax has been around since 1916 and has fluctuated over time from rates of more than 70% in the 1970's, to 45% in 2009, to zero in 2010. Now as get set to enter 2011, the estate tax is scheduled to return with rates as high as 55-60% for some estates, which may present many with a reason to revisit their estate plans.

This odd chain of events leading to a year without a federal estate tax began with tax-related laws passed in 2001 and 2003. As part of various economic growth and tax packages, those laws slowly decreased the maximum estate tax rate while also increasing the exemption amount for each estate.

In 2009, the last year in which the estate tax was in play, the maximum tax rate was 45% and the exemption amount - the amount over which the tax would be applied - had increased to $3.5 million dollars. In other words, estates valued at more than $3.5 million would be taxed on that portion of the estate over the exemption level. In its last year, the estate tax produced revenue of over $20 billion for the federal government.

Of course, one of the functions of estate planning is to help navigate these issues. If you do not currently have an estate plan, it may be wise to start planning for next year. In fact, the return of the estate tax is not really able to be ruled out for 2010. However unlikely, Congress could act to bring back the estate tax this year and apply it retroactively.

In our next post, we will touch on a few strategies individuals may employ to plan for the estate tax and preserve assets they hope to pass on to their loved ones.

Source: U.S. News & World Report, Size up your estate and do some tax planning, Kimberly Palmer 12/1/10

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