Leveraging TRA 2010’s Two-Year Gifting Window

 by Peter L McCarthy, senior advanced sales consultant for ING life sales support.

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (TRA 2010 or the Act) temporarily extends most of the provisions of the Bush-era tax cuts. Because it is set to expire on December 31, 2012, the Act creates a two-year window to take advantage of its provisions. Following is a discussion on the Act’s wealth transfer provisions with suggestions on how they could be used to encourage life insurance sales.

Federal Estate and Generation Skipping Transfer (GST) Taxes

In most cases TRA 2010 was designed to extend tax provisions that were about to expire. However, in the estate, gift and GST tax arenas, the Act didn’t just extend tax benefits, it significantly expanded them.  Estates of wealthy people who die between 2011 and 2012 can take advantage of these expanded estate tax and GST tax benefits:

  • Maximum rate estate and GST tax rates of 35 percent.
  • Estate tax exemption of $5 million (indexed for inflation in 2012).
  • GST tax exemption of $5 million.
  • Estate and gift taxes are reunified at $5 million.
  • Estate tax unified credits can be “portable” between spouses.

This means that a surviving spouse may elect to take advantage of the unused portion of a deceased spouse’s estate tax exclusion and add it to the remainder of his own estate tax exemption; only the unused credit of the last deceased spouse can be “imported.”

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