Estate and Probate Resource Center
Changes to Federal Estate Tax Laws
President Bush recently signed into law the Economic
Growth and Tax Relief Reconciliation Act of 2001[see
schedule]. The changes are complex, but in
the estate tax area, they basically provide the following:
1. The federal estate tax exemption increased to $1 million in 2002 and will
continue to gradually increase to $3.5 million in 2009. Then in 2010, the
federal estate tax ends. This is all good news, but do not throw away your
estate plans because in 2011 the federal estate tax is resurrected to
today's rates.
2. The top federal estate tax rate
(currently 55%) will decrease in 2002 to 50% and will continue to decrease
to 45% in 2009. It also will be revived after the year 2010 to the current
rate.
3. Also in 2010, a "carryover basis"
rule will apply, which will tax heirs on the capital gains they inherit.
Currently, heirs receive a step-up in basis to an asset's date of death fair
market value; however, in 2010, heirs will "carryover" the decedent's basis
and inherit a sizeable income tax at the sale of the asset.
Economic Growth and Tax Relief Reconciliation Act of
2001
