2009 Estate Plan Changes

As 2008 comes to a close, it is a good time to create an estate

plan if you do not have one, update existing estate planning

documents if you do, and examine estate tax laws to determine

whether your estate tax planning tools are sufficient to minimize

or eliminate any estate taxes that may be due upon death. This

alert addresses 2009 changes in the gift taxes, estate taxes and

generation skipping transfer taxes. It also addresses family

limited partnerships and transfers from IRAs to charities.

Gift Taxes In 2009, the annual gift tax

exemption will increase from the current $12,000 annual recipient

per donor per year to a $13,000 annual recipient per donor per year

exclusion. Thus, in 2009 an individual may give gifts to as many

different people as they wish, including cash of up to $13,000 in

value.

For example, a parent with two children and four grandchildren

may gift $13,000 to each child and $13,000 to each grandchild.

Similarly, the spouse of the gifting parent may also gift $13,000

to each of the children and $13,000 to each grandchild, thereby

gifting from both parents $26,000 to each child and each

grandchild.

If in 2009, the total value of the gifts given from one

individual to another individual exceeds $13,000, then the excess

will use as much as is needed and/or is remaining of the

individual's $1,000,000 lifetime gift tax exemption. Each

individual may gift up to $1,000,000 total value above and beyond

the annual gift tax exclusion during his or her lifetime. This

$1,000,000 exemption does not increase for 2009. The value of

assets not subject to estate taxes upon the individual's death

is directly reduced dollar for dollar by the amount of the

$1,000,000 gift tax exemption used.

For example, if person X gifted $513,000 to person Y in 2009

then the first $13,000 would be exempt from tax because of the

$13,000 gift tax exclusion. The remaining $500,000 would then use

whatever amount remained of person X's lifetime gift tax

exemption. If person X had not used any of his $1,000,000

exemption, then none of the $500,000 would be subject to gift tax

at this time. However, upon person X's death, the amount of his

estate not subject to estate tax would be reduced by that same

$500,000. If in 2009, person X makes gifts totaling $1,113,000 then

the first $13,000 would be exempt from taxation under the annual

gift tax exclusion, $1,000,000 would be exempt from taxation under

the $1,000,000 life-time gift tax exemption and the remaining

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