Although the federal estate tax is back for 2011 and beyond, the 2010 Tax Relief Act includes several favorable estate and gift tax changes, at least for two years. But there’s yet another estate-planning concern for wealthy individuals.
Strategy: Don’t forget about the generation-skipping tax (GST). This tax applies to most transfers that “skip” a generation or two or three. If you don’t address the GST, your heirs could be walking into a major tax disaster.
Fortunately, you can dodge adverse tax results with some planning.
Here’s the whole story: Under the 2010 Tax Relief Act, the federal estate tax exemption is $5 million for 2011 and 2012 (indexed for inflation in 2012), with a top tax rate of 35%. The exemption is scheduled to revert to $1 million with a top tax rate of 55% in 2013. Exemptions between spouses are “portable,” meaning an unused exemption amount can be used by a surviving spouse’s estate. In addition, the ...(register to read more)