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Page 16 Tuesday, March 29, 2011

The Public Record

New laws ease estate tax burden in 2011

BY HELENE P. DREYER KOCH, ESQ. For individuals considering making

changes to their estate plan, staying abreast of current estate tax laws can make all the difference in terms of effective and orderly distribution of estate resources. This year, for example, Congress has enacted a number of new estate and gift tax laws that may have a significant impact on planning, particularly for those with large estates. While these changes will not affect all Americans, they are important, and need to be considered. First and foremost, the estate tax changes

allow for a $5 million per individual exemption, and up to $10 million per married couple. Assets exceeding the exemption amount face a maximum estate tax rate of 35 percent. In 2010, the exemption amount was $3.5 million; this year’s increased exemption will provide substantial benefit to those with sizeable estates. In addition, the law now also allows one

spouse to carryover the unused exemption of a predeceased spouse. Under prior law, each spouse’s unused exemption extinguished at death. The new law enables surviving spouses to use their predeceased spouses’ unused exemption in addition to their own. In other words, a surviving spouse would be able to carry the full $10 million per couple exemption forward. This carryover applies only to spouses dying in 2011 or 2012. It also applies only to the last spouse to die, meaning those who choose to remarry may be waiving their carryover exemption. For the purposes of future planning, and

for the orderly dispersal of estate monies over several years, the gift tax exemption was also raised to $5 million. The gift tax applies to assets that are given away during an individual’s lifetime, rather than those passing at death. Up to $5 million in assets – or $10 million per couple – may be given away during a lifetime without incurring a gift tax, but gift tax returns must still be filed in order to take advantage of the exclusion. Any exclusion used during one’s lifetime is deducted from the estate tax exclusion amount. (For example, if you give away $3 million during your lifetime, your estate tax exclusion amount will be reduced to $2 million instead of $5 million.) Gifts in excess of the $5 million exclusion carry a maximum tax rate of 35 percent, as does the estate tax. There is still an annual exemption for gifts of up to $13,000 per individual. These gifts do not require the filing of a gift tax return. These changes to the tax code expire on

January 1, 2013 if Congress does not act to extend them. At that time, the gift and estate tax exemption amounts will revert to $1 million, and everything above that amount at the time of death will be subject to a maximum estate tax of 55 percent!

Helene P. Dreyer Koch is an attorney with

Roemer & Harnik LLP in Indian Wells. Koch’s law practice focuses on estate planning. She can be contacted for further information or consultation at (760) 360-2400 or at

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