2011 Estate Tax Changes

Andrew Schlegel Estate Planning, Estate Tax

Since our last Estate Tax update in September, major changes to the Estate and Gift Tax laws of our nation have been implemented. In December’s “lame duck” session, Congress and the President acted to prevent the Estate Tax exemption from dropping to $1 million. Highlights of this legislation include:

  • An increase in the Federal Estate Tax exemption to $5 million per person (up from $3.5 million in 2009);
  • The introduction of “portability” of the Estate Tax exemption between spouses;
  • Reunification of the Estate and Gift Tax exemptions, meaning that a person can take full advantage of the exemption before death; and
  • Lowering of the maximum Federal Estate Tax rate to 35%.

However, while these changes are beneficial for the estates of business owners, there are still planning issues to be dealt with. First, Oregon’s Inheritance Tax exemption remains in place at $1 million, with no portability provision (although legislation has been introduced to raise the exemption to $1.5 million). Additionally, Congress did not implement any permanent changes. The changes enacted by Congress will be in effect for the next two years only. After that, new legislation will need to be passed, or else we again will face a drop to a federal $1 million exemption and a maximum Federal Estate Tax rate of 55%.Additionally the spousal portability provisions will expire on that date, January 1, 2013.

This is just a brief synopsis of the changes that have been implemented. If you have any questions regarding how this may affect your estate plan, feel free to Terry Yamada or myself.