Commonly referred to as “The death tax,” the Estate Tax is “imposed on the transfer of a taxable estate of a deceased person whether such property is transferred via a will, according to the state laws of intestacy or otherwise made as an incident of the death of the owner, such as a transfer of property from an intestate estate or trust, or the payment of certain life insurance benefits or financial account sums to beneficiaries.”¹

Take a look at the chart below and you’ll see the exclusion amounts as well as the top tax rates of the Estate Tax for each year since 2001. More importantly though, you’ll notice that for 2010, there is no Estate Tax. Translation: for anyone that dies this year, there is no tax on their estate. Nothing. Zip. (Media pundits have callously referred to 2010 as the “throw grandma in front of the train” year. We don’t condone this.)

So as we inch towards New Year’s Eve, the Estate Tax-free year of 2010 as we know it is wrapping up. And things could get funky. As we talked about in May’s Estate Tax piece, properly navigating the re-institution of the Estate Tax comes down to planning and organization. Here are a few tips to help you do just that…

• Review Documentation – The end of the year is a great time to review all of our tax-related documentation. And given that there will be major changes in the realm of the Estate Tax, this should be a priority. Make sure all of your estate planning documentation is updated to reflect intent. The more crystal clear your language, the better.
• “Don’t Die Owning Life Insurance”² – New York lawyer, Joshua S. Rubenstein said this. And he couldn’t be more spot on. If you have life insurance, evaluate who owns it. If it’s not the beneficiary, we recommend making it so. If the policy is in, say, your child’s name, the insurance proceeds are no longer a part of your estate.
• Get Advice – There’s nothing like a “tips” article instructing folks to seek personal advice, but given the complicated nature of the reemergence of the Estate Tax and the vast variety of individual situations, seeking professional consult is the single best step you can take. It’s like going to the doctor: it’s never fun, but regular, personal visits will benefit you in the long run many times over.

1 Wall Street Journal, November 2010
2 Forbes, June 2010

Dave Clarke is the Communications Strategist at GetRaised.com, a recommendation engine that will show you if you’re underpaid – and give you the tools to do something about it.

More Tax Questions?

Related Articles
->Why A Roth IRA Makes Sense For a Teenager
->Planning For Capital Gains Tax in 2011
->Tax Planning For 2011
->How To Cut Down On Expenses During Retirement
->Where Are Dividend Tax Rates Going in 2011?
->Have Estimated Tax Questions?