Congress did it! The Bush tax cuts have been extended, which means that no one should get a tax increase come Jan 1st..In fact, if you’re working, your social security withholding will be decreased (but it may take til 1/31 to see the results). Most significantly, we have the Obama tax cuts for estate taxes. The new exclusion is $5 million, and you can also give that amount away during your lifetime. Step-up basis is back, and the estates of those who died in 2010 get to choose if they want the 2010 law to apply or the 2011 law. Biggest negative? It’s only good for two years!

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

The Obama-Republican tax deal (an extension of the Bush tax cuts) have enough votes in the Senate. Even better, it includes a $5 million estate tax exemption and 35% tax on the excess. But, like all good things, it comes to an end..this time in two years. The difference is that this time the $5 million can be gifted during life and is also free from Generation-skipping tax..the only problem is whether the House will go along…Stay posted!

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

If you’re reading all the debates about the return of estate taxes, then you’ve probably run across the “step-up in basis” phrase.

What is this mysterious step-up? And why do you care?

Actually, the step-up is what will keep your loved ones from paying large capital gains on the increased value of your estate.

Basically, the step-up rule says that assets get a new value when they pass to an heir and this new value is the one that’s used to determine if any capital gains taxes are owed when the property is sold.

Let’s say for example, that you purchased the family home for $50,000 decades ago but now it’s worth $150,000. Without the step-up, your heirs would pay capital gains taxes on the $100,000 profit if they sold the home after your death.

But with the step-up, a new value of $150,000 is given to the home and if your heirs sell it after inheriting the estate, they won’t have to pay capital gains tax on the new value.

To learn more about estate taxes and how they might affect your estate plan, contact our office today.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

Passing on the wealth you’ve accumulated over the years to your heirs isn’t always as easy as it seems. With the $1,000,000 estate tax exemption scheduled to come back in 2011, a much larger group of people will be paying inheritance taxes in the coming years. Fortunately, smart estate planning can help at least minimize those taxes so that the bulk of your estate goes to your heirs and not Uncle Sam.

• The Gift Tax exclusion is an important exemption that you don’t want to overlook. This allows you to gift money up to a certain amount each year, without any tax consequences. The important thing to remember is that you cannot carry it over to the next year so it is necessary to use it within the same year, or you will lose it. Under the law, you can gift up to $13,000 to the same individual each year in addition to a lifetime exclusion of $1,000,000. This $1,000,000 lifetime gift reduces the amount you can leave at death; the $13,000 annual gifts are in addition to this. In addition, gifts to spouses (if a US citizen) and those made directly to a medical provider or school are exempt as well. So, unless you have a very large estate, you could theoretically pass the majority of your estate to your heirs tax free.

• Because funeral expenses can be used as a tax deduction for the estate, this can lower the total amount of taxes that your loved ones will have to pay. So will a gift to charity.

• The portion of an estate that is left to a surviving spouse is also exempt from taxes, as long as the spouse is a citizen of the United States, and no other party has an interest in the property or assets being inherited by the spouse.

The bottom line – consulting with an estate planning attorney can ultimately save you and your loved ones money in the long run.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.