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The Estate Tax is Back

New rules still require careful planning for maximum benefits.

February 3, 2011
Maui Weekly

Bigger Exclusion. Each individual who dies in 2011 or 2012 will be able to pass on $5 million worth of assets without estate tax. If a husband and wife both die in that two-year span, they will be able to pass on a total of $10 million worth of assets estate tax-free.

Lower Tax Rate. Every dollar over $5 million ($10 million for a married couple) will be taxed at 35 percent.

Portability. This new rule allows spouses to share their coupons. If the first spouse to die doesn’t use up his or her coupon, the surviving spouse can use the remaining portion. Portability may be a good thing for an estate that is not structured at a sophisticated level, but it is a poor substitute for good planning. Those who rely on portability as an estate tax planning tool may miss out on some important opportunities.

The new estate tax rules may tempt you to think that estate planning isn’t really all that important anymore. If planning to avoid the estate tax is the only issue that is important to you, you may be right. On the other hand, you should know by now not to get too comfortable with the temporary fixes that Congress uses to patch up our national problems. Remember, the new estate tax rules are good for two years, but then all bets are off.

More importantly, effective estate planning involves making sure that you are in control of your estate, that it will be administered by your hand-picked decision-makers when you are not able to manage it, and that your assets ultimately go where you want them to go.

The estate tax is only one problem comprehensive estate plans solve, and the non-estate tax problems have not gone away. If anything, they have been brought out of the shadow of the estate tax, so more of us will now focus on what will really make a difference to us and our loved ones.



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