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New legislation, called the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, was passed by the United States Congress on December 16, 2010 and signed into law by President Barack Obama on December 17, 2010, which affects federal estate taxes.

A summary of the new law is as follows:

  • As a temporary measure, for calendar years 2011 and 2012 the Federal Estate Tax Exemption amount is 5 million dollars for persons dying during those years.

  • The highest estate tax bracket will be 35%.

  • Estate taxes remain a lien on real property for 10 years from the date of death.

  • A surviving spouse can continue to convey free of the lien of estate taxes to a purchaser for value.

  • As a temporary measure, the step-up in income tax basis has been continued for persons dying in 2011 and 2012 will go to the heirs, and give them a cost basis that is equal to the fair market value at the time of death.

  • Raises the lifetime gift tax exemption to 5 million dollars for gifts made after January 1, 2011.

  • As a temporary measure, the minimum gift tax rate during 2011 and 2012 is 35%.

If you have any questions about how the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 impacts your finances, you should speak with your financial planner or tax advisor.