FEDERAL ESTATE TAX:
The Senate and House have both passed the new tax law, which, once signed by President Obama, will include raising the federal estate tax credit to $5 million, with a 35% tax on the excess (effective 1/1/2011). The new law will also allow "portability" between spouses, which means that a married couple essentially has a $10 million federal estate tax credit. This increase will only be effective for 2011 and 2012, scheduled to go back down to a $1 million credit (55% on the excess) in 2013, but will likely be revised before then.
I will be sending out another Newsletter in the next few weeks with more specific information on the estate tax laws.
MA ESTATE TAX:
Even though the federal estate tax will be less (or zero), MA residents still have to worry about the MA estate tax, since the MA estate tax is still effective for estates over only $1 million (not set to change). The $1 million is just a "threshold", meaning that if your estate exceeds $1 million, the entire estate is taxed in MA, up to 16%. For example, for a $2 million estate (including real estate, liquid assets, retirement plans AND the full value of life insurance), the MA estate tax would be over $100,000.
It is very important for MA residents, married or single, to learn about Trusts and other techniques to reduce the MA estate tax and pass more on to their intended beneficiaries.