New tax laws should prompt families to review documents

For the next two years, the federal estate tax will be restored.  The Bush-era tax cuts included a sunset provision that temporarily eradicated the estate tax for 2010.  The tax is back, but the exemption has increased.

It was a surprise to many following this issue when President Obama not only extended the Bush-era tax cuts, but also increased the federal estate tax exemption to $5 million for individuals and $10 million for couples. 

According to a recent Mercury article, entitled, How Restoration of the Federal Estate Tax will Affect You,

some interesting implication are assessed: 

"The new law restores the federal estate tax for the next two years at a 35 percent tax rate, with estates up to $5 million ($10 million for couples) exempt from the tax. Furthermore, the new estate tax is retroactive to Jan. 1, 2010."

 The article further goes on to elaborate:

“This means that heirs of persons dying in 2010 can choose either to follow the 2010 rules (no federal estate tax at all, but with a limited step-up in the cost basis of inherited assets), or to follow the new law with a $5 million exemption and a step-up in cost basis.”

There has been some concern among attorneys as to whether the public will understand the need to properly plan a will or trust in light of these large exemptions.  On the contrary, the new tax laws that are in-flux should, if anything, prompt families to seek an updated assessment of their existing will or trust documents. 

Image: renjith krishnan / FreeDigitalPhotos.net Evan H. Farr on Google +