News

As 2009 came to a close, the US Senate failed, through inaction, to join with the US House of Representatives to extend the current federal estate tax law.  Therefore, pursuant to legislation passed in 2001, the federal estate tax and the federal generation-skipping transfer (“GST”) tax have been repealed, effective January 1, 2010.  In their place is a new capital gains tax on inherited property (when it is sold), with certain tax cost basis adjustments and exemptions.  The federal gift tax is not affected by the repeal, so remains in effect with a $1 million dollar exemption.

Pursuant to the law passed in 2001, next year, on January 1, 2011, the federal estate tax and federal GST tax will be reinstated, with an exemption of only $1 million dollars (down from $3.5 million) and a maximum tax bracket of 55% (up from 45%).  Congress may act soon to reinstate the estate tax in 2010, perhaps retroactively, or to prevent the lower exemption and higher tax bracket from taking effect in 2011.

Meanwhile, the current Massachusetts estate tax remains in place.  Since most estate plans prepared by us are geared towards minimizing Massachusetts estate tax (in addition to federal estate tax), these estate plans will continue to work as intended, without any modification needed at this time.

Please contact any trust and estate lawyer at Rackemann, Sawyer & Brewster if you have questions about your estate plan.  In general, however, we do not recommend hasty changes during this unsettled period.

 This Client Alert was prepared by the members of the Trusts & Estates Department (Lisa Weinstein Burns, Christopher M. Falzone, Albert M. Fortier, Jr., Ellen M. Harrington, Matthew J. Leonard, Hanson S. Reynolds, Janet M. Smith, and Lucy W. West) at Rackemann, Sawyer & Brewster. This Alert is presented for informational and educational purposes only, and does not constitute legal advice. Use of this Alert does not create an attorney-client relationship and is not a substitute for legal counsel. This publication may be deemed advertising under applicable law. © January 2010 Rackemann, Sawyer & Brewster, Professional Corporation.