News & Resources

Publications & Media

Looking Ahead: The Impact of the New Tax Laws on Estate Planning

Trusts & Estates Law Alert Amalia L. Todryk, John H. Lhost

On December 17, 2010, President Obama signed into law "The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010" (the "2010 Act"), clarifying the tax rules applicable for 2010 and making significant changes to the rules for 2011 and 2012. These include the following:

  • For decedents dying in 2010, the federal estate tax is re-enacted and applied retroactively to January 1, 2010 with an exemption of $5 million and a maximum tax rate of 35%. An election can be made, however, to apply the carryover basis system instead of the estate tax.
  • In 2011 and 2012, the federal estate tax exemption will be $5 million and will be "portable" between spouses; any exemption not used when the first spouse dies may be used by the surviving spouse. For instance, if the first spouse to die did not use $3 million of his or her available $5 million exemption, the remaining $3 million of exemption will be transferred to the surviving spouse and added to that spouse's $5 million of exemption.
  • The gift tax exemption remains at $1 million for 2010, but in 2011 and 2012 it increases to $5 million per person. For 2010, the generation-skipping transfer ("GST") tax exemption increases to $5 million, and for 2011 and 2012 all three exemptions (gift, estate and GST) will be unified at $5 million.
  • In 2011 and 2012, the concept of portability of unused exemption between spouses will also apply to the gift tax exemption. However, portability will not apply to the GST tax exemption. For 2010, the GST tax rate is 0%, and the GST tax rate is 35% for 2011 and 2012.
  • The "Bush-era" income tax rates that were scheduled to expire at the end of 2010 are now extended through 2012. These include the top rate of 15% for capital gains and qualified dividends.
  • In 2010 and 2011, IRA owners over age 70½ will continue to be able to have up to $100,000 per year paid from their IRAs to qualified charitable organizations without having to report the amount as income. IRA owners can use these distributions to satisfy their required minimum distribution requirements.

The following chart summarizes the changes in rates and exemptions:

Calendar Year


2011 & 2012

Estate/GST Tax Exemptions



Maximum Gift/Estate Tax Rate



Gift Tax Exemption



GST Tax Rate



It is important to note that unless Congress acts again before 2013, the changes made by the 2010 Act to the estate, gift, GST and income tax laws will expire at the end of 2012. Therefore, in the coming year, we will provide you with a more detailed discussion of some of the wealth transfer strategies you may want to consider during this brief window of opportunity.

This alert is intended as a general summary of legal matters and not as specific advice to any particular client. If you have any questions concerning the subject matter of this update, please contact John Lhost at (414) 277-5867 /, Amalia Levit Todryk at (414) 277-3041 / or your local Quarles & Brady attorney.