Personal Planning Strategies - October 2010

NOW IS THE TIME TO TAKE ADVANTAGE OF CHANGES TO THE FEDERAL GIFT AND GENERATION-SKIPPING TRANSFER TAXES IN 2010

Two changes to the Federal wealth transfer system that were enacted pursuant to the Economic Growth and Tax Relief Reconciliation Act of 2001 (the "2001 Act") during President Bush's first year in office create, at least in the absence of retroactive legislation, a favorable environment in 2010 for gift planning. As further discussed below, with less than three months left in 2010, the window is shortening to implement a couple of "once in a lifetime" gifting opportunities.

First, under the 2001 Act, the Federal gift tax rate was reduced to 35% for gifts made in 2010 (as compared to the 45% gift tax rate applicable in 2009 for most gifts). The lifetime exemption from the gift tax is unchanged and remains at $1 million for 2010.  Second, the 2001 Act repealed the generation-skipping transfer ("GST") tax for 2010. The GST tax is a transfer tax in addition