Since the Federal estate tax lapsed at the end of 2009, an opportunity arose for high-net-worth individuals to benefit from a rather confusing situation.  The Federal estate tax, also referred to as the “death tax”, was scheduled to be repealed for the year 2010 but no one in the industry expected Congress to allow this to occur.  Now, those who die this year will be able to escape a federal tax of up to 45% on estates valued at $3.5 million or more.  The tax is currently set to be reinstated in 2011 at a rate of 55%, which means that wealthy individuals better walk behind their children when descending the staircase for the time being.

For years, legislators in our nation’s capital have said they would make sure the estate tax law didn’t lapse by passing new legislation by the end of last year.  However, with the debate over health care reform bogarting most of the attention on Capitol Hill, Congress has yet to address the estate tax issue.  When Congress finally does get around to addressing the estate tax law issue this year, it is highly likely that they will make it retroactive to Jan. 1.  This could cause mass confusion for any estates probated or executed in the meantime as the Federal Government could come knocking to collect past-owed estate taxes.

Even if legislation is retroactive, this temporary loophole provides a once in a lifetime opportunity for high-net-worth individuals to leave massive amounts of money to their heirs at a much lower tax rate than they will undoubtedly pay once legislation is in place.  Specifically, with the expiration of the estate tax law, the generation skip tax also disappears. This means that during this time of no estate tax, individuals can gift up to $3.5 million to grandchildren and pay only gift tax on the money.  A good estate planning attorney will also add language that allows the individual to make a gift to grandchildren but stipulate that they can take the gift back if the law changes forcing additional retroactive taxes.

For more on how you and your family might benefit from the temporary repeal of the Federal estate tax, please contact our South Florida estate planning attorneys at 954-944-2855 or via email at