Estate Tax: Federal Changes On The Horizon

9 Dec

A plan put forward by Republicans and accepted by President Obama would reinstate the estate tax at 35% for two years starting in 2011, with the first $5 million of a person’s estate exempted from tax. The measure appears to have enough support to pass, though many Democrats oppose the proposal. If the proposal does not pass, the estate tax will be reinstated at a 55% rate, with a $1 million exemption.

According to the nonpartisan Tax Policy Center, the 55% top tax rate with a $1 million exemption would result in about 43,540 taxable estates in 2011 and raise about $34.4 billion. The Republican proposal would mean result in 3,600 taxable estates in 2011 and raise about $11.4 billion.

While a $5 million exemption may alleviate some concerns about paying estate tax, even with a high federal exemption, Minnesota still imposes estate tax on estates worth more than $1 million. With life insurance, retirement accounts and cash savings, it doesn’t take long for the average family to accrue $1 million worth of taxable assets. For those individuals and couples with assets in excess of the exemption amount, a carefully considered estate plan can help avoid or delay payment of estate tax.

This blog entry was written by Ivory Ruud, an associate at Thomsen & Nybeck, P.A. Ivory is a transactional attorney practicing business law, real estate, estate planning and probate, and townhome and condominium law. Ivory works with individuals and businesses, offering advice and guidance for her clients’ long-term planning and risk management.

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