Congress will be discussing its plans on reissuing estate and income taxes next week, according to The New York Times. After the estate tax lapse this year, legislators have five weeks to act on it before the holiday break. Many NY estate planning lawyers have been speculating on how the return of the estate tax will affect their clients’ assets but have not yet reached any definite conclusions.
The estate tax will slip back to the 55 percent tax rate for individual estates more than $1 million, just as in 2001, if Congress does not act. Tax Policy Center, a Washington research group, said around 44,000 will have to pay taxes while 108,000 estates would have to file return under the lower exemption. In 2009, there were 5,500 who owed taxes and 15,000 estate tax returns.
With the estate tax, beneficiaries have to calculate the appreciated value of a deceased’s assets and pay capital gains tax on that amount. Putting gifts in a trust may subject them to taxes, such as the generation-skipping tax. Although this tax wasn’t in place this year, grandchildren who receive gifts may be taxed next year when they withdraw money received under this scheme. Wealthier individuals will also face higher costs to reduce the portion of their estate to a person that is more than $1 million or $2 million for a couple.
Income taxes may also increase in 2011, although it is uncertain whether it will affect all people or only the affluent. Taxpayers may want to hold off on making gifts until January to get a higher charitable deduction if the income tax rate rises to 39.6 percent. Capital gains taxes could also come into effect and rise from 15 percent in 2009 to 20 percent next year.
Talk to an NY estate planning lawyer to plan your assets accordingly in preparation of the upcoming taxes. For general information, visit the Related Resources links.
- How to Prepare for the Return of the Federal Estate Tax (FindLaw’s NY Estate Planning News Blog)
- Call an NY Estate Planning Lawyer (FindLaw)
- Federal Estate and Gift Tax Laws (FindLaw)