2010 Repeal of Estate and Generation-Skipping Transfer Taxes

Congress failed to come to an agreement regarding the scheduled one-year repeal of the estate tax and generation-skipping transfer (“GST”) tax, with the result that, as of January 1, 2010, these taxes have been repealed and the Federal gift tax rate has been reduced from 45% to 35% for a one-year period. Further, as of January 1, 2011, if Congress takes no action, these laws will sunset, and the estate and GST taxes will return with a $1 million exemption and a top bracket of 55%.

There is a significant chance that Congress will enact legislation retroactive to January 1, 2010 that would reinstate the estate and GST taxes and the 45% gift tax rate on a permanent basis. However, there is considerable uncertainty generated by the current situation.

The attached “Memorandum Regarding 2010 Repeal of Estate and Generation-Skipping Transfer Taxes” describes the current state of the transfer tax laws and discusses generally how clients may wish to proceed in light of the temporary repeal of the estate and GST taxes.