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Don’t skip over generation-skipping tax

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in Small Business Tax,Small Business Tax Deduction Strategies

Although the American Taxpayer Relief Act (ATRA) finally resolved much of the uncertainty relating to federal gift and estate taxes, you’re not out of the woods quite yet.

Strategy: Plan ahead to avoid the generation-skipping tax (GST). This low-profile but potentially very expensive tax can hit wealth transfers that “skip” more than one generation.

Here’s the whole story: The federal gift and estate tax regime has undergone a long progression since the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).

EGTRRA gradually increased estate tax exemption amounts and decreased tax rates leading up to a one-year repeal for 2010. Following EGTRRA, the estate tax was reinstated and temporary legislation allowed a $5 million exemption for 2011 and 2012 (with future indexing), while lowering the tax rate to 35%.

Under ATRA, the unified federal gift and estate tax exemption was permanently set at $5 million (indexed to...(register to read more)

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