Some of the wealthy elderly people in the United States feel compelled to give away what they would have normally passed on upon death, a New York Estate Lawyer reports. Congress has yet to vote upon the estate tax, which does not exist in 2010, but may come back in 2011, meaning a significant amount of any inheritance could be taken by the government if someone dies after December 31.
There are no taxes on inherited money for 2010, but the rate will go up to 55 percent if Congress does not do something in the post-election session, according to New York Estate Lawyers. So, there are two main things to do to save money: die in 2010, or transfer money to the family at the relatively low tax rate of 35 percent. The gift tax will also rise to 55 percent at the end of 2010 if Congress does nothing.
It is the usual practice of the government to keep estate taxes and gift taxes closely matched so the wealthy can’t use one method or the other to reduce the government’s cut. As of now, Americans can give away $13,000 tax-free, per person, up to a $1 million lifetime maximum. Once it gets past $1 million, gifts are taxed like an estate – except for this year, when the gift tax is only 35 percent, and the estate tax is nothing at all.
The rates were set in 2001, by President Bush and Republicans in an attempt to permanently repeal the estate tax, according to New York Estate Lawyers.
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