"President Signs New Bill Dramatically Reducing Federal Estate, Gift and Generation-Skipping Tax Rates to 35% and Increasing All Exemptions to $5,000,000"

On December 17, 2010, President Obama signed bipartisan legislation that reduces the estate, gift and generation-skipping transfer ("GST") tax rates to 35% and uniformly increases the exemption amounts for estate, gift and GST taxes to $5,000,000 as of January 1, 2011. 

This legislation marks the end of a year of tremendous uncertainty for individuals planning their estates due to the temporary repeal of the Federal estate and GST taxes in 2010 and the threatened reinstatement of those taxes in 2011 at a 55% rate with a $1,000,000 estate tax exemption. 

This Stroock Special Bulletin highlights key provisions of the new law, which opens the floodgates on January 1, 2011, for wealthy families to gift up to $10,000,000 free of transfer taxes.  Similar to the quirky feature of the old law, these new provisions "sunset" at the end of 2012.  It is possible that the estate, gift and GST tax rates could increase above 35% or the exemptions could be modified after 2012.