On Dec. 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the Act). The Act significantly impacts the estate planning that advisors will recommend to their clients, as well as the way planners will practice now and in the future. This article briefly describes the Act's key estate, gift and generation-skipping transfer (GST) tax changes, since many other Trusts & Estates articles have previously covered these topics. Our focus is on the Act's current and future influence on estate planning practices.
The Act retroactively reinstates the estate tax as of Jan. 1, 2010, but increases the exemption amount from $3.5 million to $5 million and lowers the maximum tax rate from 45 percent to 35 percent. Internal Revenue Code1 Section 1014's “step-up or down to fair market value” at death basis provisions were also restored. Moreover, the Act offers estates of decedents who died in 2010 the option of electing out of the estate tax regime (no federal estate taxes imposed) and into the modified carryover basis system.
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