Estate and Gift Planning Update – November 2010

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Two quick updates as we head into December and the last month of the 2010 Estate Tax Repeal:

  1. 2011 Annual Gift Tax Exclusion to Remain the Same at $13,000. In 2010, the annual gift tax exclusion permits a taxpayer to gift $13,000 to any beneficiary, annually, even if the taxpayer has used up his or her $1 million lifetime gift exclusion. The 1997 Tax Reform Act tied the annual exclusion amount to increases in the CPI Index, and as a result, the annual exclusion has increased from $10,000 in 1997 to $13,000 currently. Due to a lack of significant inflation in 2010, the maximum gift tax annual exclusion in 2011 will remain at $13,000. This should also serve as a reminder that there is approximately one month left to take advantage of your 2010 annual exclusion gifts.
  2. December AFRs even lower than historically low November AFRs. The December Applicable Federal Rates were just released, with the “7520 rate” falling to 1.8% from 2% in November. With such low rates, techniques such as GRATs and Sales to Grantor Trusts are even more attractive due to the low amount of interest that needs to be paid back to the taxpayer as a result of the transfers made by the taxpayer.

As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.

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