Estate Tax Set to Expire…Temporarily

The 2001 Tax Act provides for a one year expiration of the estate tax for taxpayers dying in 2010. After the one year moratorium, the estate tax exemption and marginal tax rates will return to those in effect before the 2001 Act. Most of the estate planning community expected Congress to take action providing an extension of the 2009 rates into 2010, and allowing them more time to consider more permanent legislation.

However, last minute efforts to extend the 2009 rules for another year were unsuccessful, so, under current law, taxpayers dying in 2010 will receive an unlimited exemption from the estate tax. In addition (without additional legislation) beginning in 2011, the law will return to a $1 million dollar exemption and marginal rates as high as 55%.

Here is a brief summary of the current estate tax structure for individuals:

Year Exemption Tax Rate
2009 $3.5 million 45%
2010 unlimited 0%
2011 $1.0 million 55%

While this might appear to be a favorable development, at least for the estates of 2010 decedents, legislators have announced their intent to “fix” this expiration next year and to apply any changes retroactively to January 1.

So, for taxpayers and their advisors, the uncertainty that has surrounded the estate planning process for the past decade continues into next year, at least. We hope that Congress will devise a permanent solution so that taxpayers can plan with more certainty in the future.

We will continue to monitor the situation and keep you aware of changes as they come about. If you have any questions or comments, please let us know.

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Horizon Wealth Advisors
Horizon Wealth Advisors
Horizon Wealth Advisors is a Houston-based, privately owned, fee-only financial advisor established in 1999. Our mission is to develop long-term relationships with thoughtful, successful individuals, families, and organizations by supporting and assisting them in achieving their financial goals.

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