Saturday, January 29, 2011

2010 changes and how to plan in 2011 and 2012

The dust has now settled on the 2010 Tax Legislation called "The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010" which was passed in December of 2010. This act was passed just a few weeks prior to the so called "sunset" of the Bush tax cuts and has generally extended those cuts for two more years (until December 31, 2012). No matter where you are at on the political spectrum, this act has created some interesting planning opportunities that may, or may not, exist at the end of 2012 (depending on the results of that election). My goal is to place my other ongoing series of posts on hold and spend some time unpacking this tax act. There is much that needs to be discussed from the act, and I will start discussing the major areas that clients are asking about and that they should be asking about.

In no particular order, some of the topics that are of interest to my clients are: the addition of an election for decedent's estates dying in 2010 (either keeping the unlimited estate transfer with no step up in tax basis or the five million dollar exemption with the step up in tax basis), portability of a deceased spouse's unused exemption amount, the extension of income tax dividend and capital gain rates, and much more.

I will be discussing many of those topics in individual blog posts, but at this time note that if you have an estate over five million dollars (for a single individual) or over ten million dollars (for a married couple), this two year period may give you an unparalleled planning opportunity (especially if the election in 2012 creates a balance of power in the government that does not support the five million dollar exemption). Many of my high net worth clients that have taxable estates over the ten million dollar level are really looking at using the full ten million dollar gift to fund life insurance strategies, private annuity strategies, installment sale strategies, and many others. If you have been waiting to discuss proper planning until a more permanent law is passed into effect, then you may want to reconsider for this next two year period.

If you have any questions about your current estate planning or about what techniques can really work in this environment for the next two years, do not hesitate to contact me at 949-788-1819 or

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