In 2010 we had a one year respite from the estate tax, and most people view any tax relief as a positive. However, there is an intrinsic inequity existent in a temporary repeal that makes a relative few immune to a tax the rest of us must address. A good case in point involves the former owner of the fabled New York Yankees, the mercurial George Steinbrenner who died in July of 2010.
Forbes magazine estimated the overall worth of his estate at $1.1 billion. The estate tax exclusion amount in 2009 was $3.5 million. So the $7 million estate of someone who died on New Year’s Eve in ’09 was subject to a seven figure estate tax levy while the Steinbrenner heirs faced zero taxation on an estate worth more than one hundred times that amount.
Anyway, the estate tax is returning again in 2011 and it has some wide reaching implications due to changes in the exclusion amount. As touched upon above, the exemption amount in 2009 was $3.5 million, and in 2006 through 2008 it was $2 million. If you planned your estate using these parameters, now would be a good time to take inventory of the assets in your estate because the exclusion amount is going down to $1 million in 2011. So if your estate is worth more than a million dollars, the portion that exceeds this exemption amount will be subject to the estate tax, and the rate of taxation is going up as well. In 2009 the top rate was 45%, but in 2011 it will be a whopping 55%.
It is worthwhile to point out the fact that the estate tax exclusion amount and rate of taxation are hotly contested topics in Washington. There have been murmurs about possible legislative actions to amend these parameters, but this is the law as it currently stands.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.