What does the new Estate Tax Law Mean For You?
In accordance with existing federal law, on January 1, 2010, the federal estate tax was repealed only for those individuals (decedents) who died during 2010. Unfortunately, for those of us who survive 2010 (and the economy that 2010 provided!) on January 1, 2011, current federal law reinstates the federal estate tax exemption.
An exemption is similar to a coupon that will expire upon your death, and if it is not used, it goes to waste. Accordingly, if the size of your estate, including the equity in your home and death benefit of a life insurance policy, exceeds the available exemption, the excess sum is subject to federal estate tax at a progressive rate of up to 55%! In practical terms, on January 1, 2011, the estate tax exemption is reinstated at $1,000,000 and, as a result, every dollar over $1,000,000 in your estate will be taxed at a rate of up to 55%. It is important to keep in mind that, at any time, Congress can enact legislation modifying the 2011, and any future, estate tax exemption and the marginal tax rate.
It is important to note the above only discusses federal estate tax. Both Minnesota and Wisconsin may impose a state estate tax. Historically, both states have imposed an estate tax, however, currently only Minnesota maintains such a tax. If the federal government elects to increase exemptions, it is likely that Wisconsin will join the party and impose a state estate tax.
I will keep you up to date on any legislation that would alter estate taxes and will send a follow up letter in January. In addition, Eckberg Lammers will host informational seminars in January of 2011 to explain and discuss the likely forthcoming legislation or, if none, the existing law. To pre-register for a seminar please contact my assistant Denise Aschenbrener at email@example.com or call 651-351-2121.