Tax Law for 2011-2012

The 2010 Tax Act is a Temporary Estate Tax Law which:

-sunsets December 31, 2012
-expect acrimony and difficulty in creating new tax policy in 2013

The Tax Act:
-permits $5 million tax-free death transfers to beneficiaries

-Combined spousal exemptions mean $10 million pass tax free for deaths in the next 2 years.

With the national deficit, a lower exemption affecting the middle class is possible in 2013. Never forget that in 

1975  the exemptions was $60,000  at a estate tax rate of 77%.

Formal Name of New Estate Tax Law:

2010 Tax Relief Unemployment Insurance Reauthorization and Job Creation Act

The Tax Act does not plan for your:


-eventual deaths

-children's futures and it phases out in 2 years. 

Portability Feature

The portability provision permits surviving spouses to claim on their own estate tax returns any exemption not used by their spouses. The 2011 exemption is $5 million. 

If a spouse dies in 2011 or 2012  with a taxable value of $4 million, his estate owes no tax and his wife’s estate may claim the unused $1 million exemption when she dies. Assuming  the $5 million exemption is in effect at date of death, the survinving spouse's  estate avoids tax on its first $6 million.

Caveat—The surviving spouse must file an estate tax return that specifically provides for portability on time, whether or not the estate owes any tax. Otherwise, the extra exemption is lost forever.  

Likewise, the executor of an estate may specifically deny portability on the return, thus making it unavailable to the surviving spouse.