Estate Planning Law Changes in 2009

Changes in Estate Planning for 2009

In 2009, several changes have occurred that impact estate planning including: (1) A rise in the Annual Gift Tax Exclusion for Gifts to $13,000 from $12,000, (2) The unified estate tax credit (if you pass on with assets below the credit, your estate will not owe any estate taxes)  increases to $3.5 million dollars from $2 million dollars., (3) The Annual Gift Tax Exclusion for Gifts to Non-Citizen Spouses increses to $133,000 from $128,000

Proposed Changes in 2009 for Estate Planning

H.R. 436: 2009-2010 Certain Estate Tax Relief Act of 2009 is a bill that is working its way through congress that will go into effect on January 1, 2010. This bill proposes the following: (1) The unified estate tax credit shall be for 2010 and beyond $3.5 million dollars, (2) The estate tax above the credit will be 45%, (3) Current carryover tax basis laws will continue for 2010 and beyond, (4) Estates over $10 million dollars will phase out the graduated rates in the form of an additional 5% tax, (5) IRS valuation discounting of non-business assets owned by a corporation or LLC will no be allowed. The lifetime gift tax exclusion shall remain $1 million dollars.

What does this all mean?

Assuming H.R. 436 is passed, the bottom line for all of these changes is that the estate tax is here to stay but only a small percentage(less than 2%) of Americans will need to worry about the estate tax. For those high net worth individuals with estate tax issues, they will no longer be able to use Corporations or LLC's to discount the value of passive assets such as cash and securities. This does not affect the ability to discount the value of businesses and investment real estate in an LLC or Corporation.

If this bill or a similar bill is not passed this year, in 2010 there will be no estate tax and in 2011 and beyond, the estate tax exemption will drop to 1 million dollar with maximum tax rate being 55%.

Brian Chew, the managing partner of OC Wills & Trust Attorneys, has extensive experience in the areas of estate planning, asset protection planning, business succession planning, long-term care planning, and veterans’ benefits. By devoting his practice to estate planning matters, he has founded a firm that strives to provide exceptional service to their clients by working closely with individuals and their families to create comprehensive and customized estate plans. For the past twenty five years, Brian has served thousands of clients in the matters of estate planning, wills and trusts. If you have any questions about this article, you can reach Brian Chew here.