The rich get richer. Last December, Congress passed new estate tax legislation that allows wealthy individuals who die this year to pass on any unused portion of their estate tax exemption to their surviving spouse. The estate tax exemption 2011 potentially allows wealthy widows to pass on $10 million tax free.
Previous to the new law, the estate tax exemption allowed individuals to bequeath up to $5 million of their assets tax free, reports Bloomberg. So, most people could pass on their assets without being subject to the estate tax. However, for those extremely wealthy few who had more than $5 million to pass along, they were subject to giving up a sizable chunk of their estate to Uncle Sam in taxes.
But not content with just $5 million tax free, the wealthy were able to convince Congress to give them an additional break. Under the new estate tax law, someone who dies in 2011 but fails to give away $5 million can pass along their unused portion to the surviving spouse, reports Bloomberg.
For example, if Harry dies this year and left $2 million to his children and gave away nothing else at death, he would have a $3 million exemption that was unused. Previous to the new law, that $3 million of potentially untaxed money would be wasted. But with the new law, Harry's widow, Wilma, would be able to use the exemption. So when Wilma dies, she can pass on $8 million to her heirs without being subject to the estate tax if she dies before 2013.
The estate tax exemption 2011 gives an added tax benefit to those families who arguably don't need the tax benefit. But Congress passed the law, and the rich got richer.
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