Posted by: Coto Legal Services, PLC | April 1, 2011

New Estate Tax Law Changes

New Estate Tax Changes:

  1. Raises each individual’s lifetime exemption from federal estate and gift tax for transfers to non-spouse heirs to 5 million dollars.  Therefore,  if fair market value of your net assets is less than 5 million dollars or 10 million dollars, if married, then no estate taxes are owed.
  2. It makes the exemption portable between spouses, meaning a surviving spouse can add any unused exemption of her just deceased spouse to her own 5 million dollar exemption.  So a widow or widower can pass on as much as 10 million dollars, untaxed, through either lifetime gifts or bequests.
  3. Key Portability Points:
    1. Portability is not automatic.  The executor of the estate of the first spouse to die must file an estate tax return, even if no tax is due.   Surviving spouses should get this return filed even if they have nowhere near 5 million dollars of their own.
    2. Portability is not retroactive.
    3. Portability does not apply to the 5million dollars per person exemption from the Generation Skipping Transfer Tax- the extra tax imposed on gifts to grandchildren whose parents are still alive.
    4. Estate law expires at end of 2012.  If legislature does not change estate tax law, then portability lapses and the exemption amount will revert to 1 million dollars and the estate tax rate will increase to 55%, from the current rate of 35%.
    5. Why still have Trusts if assets are valued well below estate tax exemption amounts of 5 million dollars or 10 million dollars, if married):
      1. Primarily for non-tax reasons:
        1. i.      When there are blended marriages (i.e. a spouse or both spouses have children from a previous marriage.  Family trusts are important to ensure that children from a previous marriage do not get disinherited.
        2. ii.       Creditor protection for the trust beneficiaries.
        3. iii.      Avoid Probate, which could be costly, time consuming, and create potential family disputes.

      Please Contact Coto Legal Services, PLC for any questions regarding estate planning techniques and strategies.  Our firm will customize an estate plan that will meet your objectives and goals.   We welcome you to visit our website at and e-mail us at

      Information contained on this blog is not intended to be legal advice, and visiting this blog does not establish an attorney-client relationship.

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