Estate Tax Alert – January 2011

January 20, 2011

As 2011 progresses, we have received clarification from the federal government on the applicability of the new estate taxThe Federal tax that is imposed on transfer of assets at death, especially to non-spouses. The current Federal Estate Tax, simply speaking, is for assets in excess of 5.34 million dollars for the year 2014. There is not currently an estate tax in Wisconsin, but approximately 20 other states still have some form of estate tax. law for deaths occurring during the year 2010, and new estate taxThe Federal tax that is imposed on transfer of assets at death, especially to non-spouses. The current Federal Estate Tax, simply speaking, is for assets in excess of 5.34 million dollars for the year 2014. There is not currently an estate tax in Wisconsin, but approximately 20 other states still have some form of estate tax. law for deaths occurring in 2011 and 2012.

The new Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 (TRA) modifies the estate taxThe Federal tax that is imposed on transfer of assets at death, especially to non-spouses. The current Federal Estate Tax, simply speaking, is for assets in excess of 5.34 million dollars for the year 2014. There is not currently an estate tax in Wisconsin, but approximately 20 other states still have some form of estate tax. for the years 2010, 2011, and 2012. Specifically, it puts in place an estate taxThe Federal tax that is imposed on transfer of assets at death, especially to non-spouses. The current Federal Estate Tax, simply speaking, is for assets in excess of 5.34 million dollars for the year 2014. There is not currently an estate tax in Wisconsin, but approximately 20 other states still have some form of estate tax. system for those who died in the 2010 tax year which allows for the election of the rules under the previous Economic Growth and Tax Relief Reconciliation Act of 2001, or to allow a new estate taxThe Federal tax that is imposed on transfer of assets at death, especially to non-spouses. The current Federal Estate Tax, simply speaking, is for assets in excess of 5.34 million dollars for the year 2014. There is not currently an estate tax in Wisconsin, but approximately 20 other states still have some form of estate tax. law to apply. Therefore, where that person died in 2010, that deceased person’s estate or trustThe arrangement creating the legal ownership of assets by a trustee for the benefit of the Settlor and/or other beneficiaries. may have the right to choose if the old law or new law applies to his or her estate.

This is a unique opportunity for the fiduciaries of estates and trusts of decedents who died in 2010, to elect to follow the law which is most beneficial to their estate or trustThe arrangement creating the legal ownership of assets by a trustee for the benefit of the Settlor and/or other beneficiaries.. Normally, but not always, decedents with estates of less than $5 million willA written document that sets forth and names the personal representative who will be in charge of overseeing the probate process and names the specific bequest and residual beneficiaries of property who are to receive and inherit assets and property through probate. A Will does not avoid probate, and must be properly drafted and executed to be legal. A Will can also avoid the use of a surety bond in many instances and can help utilize an “informal” Wisconsin probate process if it has the proper clauses and attestation clause. prefer to choose the estate taxThe Federal tax that is imposed on transfer of assets at death, especially to non-spouses. The current Federal Estate Tax, simply speaking, is for assets in excess of 5.34 million dollars for the year 2014. There is not currently an estate tax in Wisconsin, but approximately 20 other states still have some form of estate tax. in order to receive the full “step-up in basis” rather than electing out of the new estate taxThe Federal tax that is imposed on transfer of assets at death, especially to non-spouses. The current Federal Estate Tax, simply speaking, is for assets in excess of 5.34 million dollars for the year 2014. There is not currently an estate tax in Wisconsin, but approximately 20 other states still have some form of estate tax. law to the “carry over basis” system. This can be important depending upon the size of the estate and for other matters, such as if the decedentA person who has died. In the Wisconsin probate and estate planning context, it usually refers to the person who created the Will or Trust after he or she has died. owned a life estate in property.

Of course, other considerations willA written document that sets forth and names the personal representative who will be in charge of overseeing the probate process and names the specific bequest and residual beneficiaries of property who are to receive and inherit assets and property through probate. A Will does not avoid probate, and must be properly drafted and executed to be legal. A Will can also avoid the use of a surety bond in many instances and can help utilize an “informal” Wisconsin probate process if it has the proper clauses and attestation clause. have to be given in deciding which law to apply as there are no “hard and fast” rules to apply – each case must be considered separately and on its own merits. Accordingly, each estate or trustThe arrangement creating the legal ownership of assets by a trustee for the benefit of the Settlor and/or other beneficiaries. should be closely examined to determine the most advantageous law to apply.

For deaths occurring in 2011, the applicable exclusion amount determined by the applicable credit is $5 million. Beginning in 2012, this amount willA written document that sets forth and names the personal representative who will be in charge of overseeing the probate process and names the specific bequest and residual beneficiaries of property who are to receive and inherit assets and property through probate. A Will does not avoid probate, and must be properly drafted and executed to be legal. A Will can also avoid the use of a surety bond in many instances and can help utilize an “informal” Wisconsin probate process if it has the proper clauses and attestation clause. be subject to increase for inflation, with the next adjustment rounded to the nearest $10,000 amount.

Although the new TRA law simplifies estate taxThe Federal tax that is imposed on transfer of assets at death, especially to non-spouses. The current Federal Estate Tax, simply speaking, is for assets in excess of 5.34 million dollars for the year 2014. There is not currently an estate tax in Wisconsin, but approximately 20 other states still have some form of estate tax. planning in the near term, it certainly complicates planning over the long term. The primary reason for this complication is that the TRA law is set to “sunset” on December 31, 2012. The possibility of a new estate taxThe Federal tax that is imposed on transfer of assets at death, especially to non-spouses. The current Federal Estate Tax, simply speaking, is for assets in excess of 5.34 million dollars for the year 2014. There is not currently an estate tax in Wisconsin, but approximately 20 other states still have some form of estate tax. – at much lower exclusion amounts – may warrant estate planningPlanning in advance of disability, incapacity, or death to make sure that key life issues have been addressed while the person is still of sound mind and able to understand and sign key documents such as Power of Attorneys, Power of Attorneys for Health Care, Wills, and Trusts to form a strategy and provide for the administration and disposition of his or her assets upon death or upon incapacity. of a more proactive approach.

For most estates and trusts, the new $5 million exclusion amount means that the estate taxThe Federal tax that is imposed on transfer of assets at death, especially to non-spouses. The current Federal Estate Tax, simply speaking, is for assets in excess of 5.34 million dollars for the year 2014. There is not currently an estate tax in Wisconsin, but approximately 20 other states still have some form of estate tax. is not likely not be a major concern, at least until 2012, when we may have a new estate taxThe Federal tax that is imposed on transfer of assets at death, especially to non-spouses. The current Federal Estate Tax, simply speaking, is for assets in excess of 5.34 million dollars for the year 2014. There is not currently an estate tax in Wisconsin, but approximately 20 other states still have some form of estate tax. law or, upon the sunset of the TRA.

At Wokwicz Law Offices, LLC, we can help you regardless of the size of your estate. We work with individuals of varying degrees of wealth, and willA written document that sets forth and names the personal representative who will be in charge of overseeing the probate process and names the specific bequest and residual beneficiaries of property who are to receive and inherit assets and property through probate. A Will does not avoid probate, and must be properly drafted and executed to be legal. A Will can also avoid the use of a surety bond in many instances and can help utilize an “informal” Wisconsin probate process if it has the proper clauses and attestation clause. work hard to create an estate plan that is right for you and your situation. Please contact us to discuss your estate plan.