Run, Don’t Walk to Your Estate Planning Attorney
Time is running out – we are in the last quarter of 2010, with a host of dramatic changes in the tax laws approaching:
- For the remainder of 2010 there is no federal or North Carolina estate tax.
- For 2010, the estate tax has been replaced with a complex modified carryover basis regime which requires careful planning for estates over $1.3 million.
- The federal estate tax returns in 2011 with a $1 million exemption and a 55% rate. North Carolina will also have an estate tax, with a maximum rate of 16%.
- Federal income tax rates will increase next year, with the top rate rising from 35% to 39.6%. In addition, the maximum capital gains rate will increase from 15% to 20%, and qualified dividends will be taxed at regular income tax rates rather than 15%.
- In 2013, a 3.8% Medicare surtax will be imposed on unearned income for taxpayers with income over $200,000 (singles) and $250,000 (married filing jointly). Earned income above those levels will face an additional .9% Medicare tax.
There have also been alarming developments in the law regarding the ability of creditors to reach IRAs:
- SEP and SIMPLE IRAs are not specifically protected under either federal or North Carolina law.
- A majority of courts have held that Inherited IRAs are not protected from creditors.
- An IRA payable to a revocable trust may not be protected from your creditors after your death.
Finally, existing wealth transfer techniques for reducing gift and estate taxes such as discounted gifts from Family Limited Partnerships and Limited Liability Companies and Grantor Retained Annuity Trusts may be severely curtailed if the Obama administration gets its way.
Heavy stuff on a Friday afternoon, but don’t delay – contact your estate planning attorney right away to formulate a plan to protect your assets and save taxes for you and your family.