What No Federal Estate Tax Means

If you listen to the news and talking heads you would think that with our 2010 “repealed” estate tax, everything is wonderful for those who want a low overall tax burden. Well, that might not be the case. Take a look at this Wall Street Journal article entitled “Why No Estate Tax Could Be a Killer.”

The article points at that while there is no estate tax to speak of, under current law, in 2010, there is a change in how the capital-gans tax rules are handled.  According to the article, estates with assets between $1.3 and $4.3 million would have been better off under last years estate tax rules, while bigger estates will have more of a tax savings this year.

Where do we go from here?  Who knows.  We all thought that the $3.5 million exemption amount we had last year would have been frozen and carried forward.  However, our government took no action.  The later we get into 2010, the more that I think we will look at the estate tax exemption coming back at $1 million per the current law for 2011 and beyond.

Either way, it is important that your estate plan be reviewed to make sure that the Federal Tax planning strategies that were used are still sufficient.