Yuma Sun: Many of us spent our childhood years playing sports and games. An important part of our development was learning the rules. Once we understood the rules, we could develop creative strategies for winning.
When the rules changed, our strategies needed to adapt. Estate planning is no different. Late in 2010, President Obama signed into law changes to estate and gift tax rules.
If you haven't already, it's important to review the new rules and make adjustments to existing estate planning and gifting strategies. Here are a few of the changes that may affect your plans:
• Estate taxes reinstated — In 2010, for a single year there was no estate tax. During 2011 and 2012, the top estate tax rate will be 35 percent and the estate tax exemption amount will be $5 million. In 2013, these temporary changes will end and we may see a return to higher estate tax rates and lower exemption amounts.
• Generation-skipping transfer tax repealed — Generation-skipping transfers allow one person to reassign ownership of assets to another person who is two or more generations younger. For example, a grandparent might transfer ownership of property, by gift or at death, to a grandchild. Historically, GSTs have been taxed at the highest estate tax rate. However, for 2010, the GST tax was temporarily repealed. As a result, gifts made to grandchildren during 2010 were assessed gift tax and not GST tax.
The GST tax returned in 2011 with the top rate at 35 percent. Executors of estates for those who died during 2010 chose between the estate tax rules for 2010 and those for 2011 by filing an estate tax return within nine months of the new law's enactment.
Read more about the new estate and gift tax rules for 2012.