In an extraordinary turn of events, the U.S. Congress in 2009 failed to
preserve the federal estate and generation-skipping transfer (GST) taxes in
2010, with the result that the federal estate, gift, and GST taxes have changed
greatly from what they were in 2009.
Estate and GST taxes have been completely repealed for one year, while the
gift tax remains in place with a $1 million exemption and 35% maximum rate.
Unless Congress acts during 2010, estate, gift, and GST taxes as they existed
before 2002 will automatically be reinstated in 2011 with a 55% rate (with a 5%
surcharge on estates or cumulative gifts between $10 million and $17.184
million); a $1 million exemption for lifetime and testamentary transfers; and a
$1 million exemption from GST tax (as indexed for inflation since 1999).
Because of this changed and unpredictable environment, U.S. clients resident
in the UK or Europe, and their advisors, now face significant uncertainty in planning the
gratuitous transfer of assets given the current state of transfer tax exemptions
and rates. Non-US spouses whose US spouses died before 1st January 2010 and who
have QDOTs are particularly affected on distributions received during their
lifetime after 31st December 2009 and before 1st January 2021.
For an in-depth briefing by McGuireWoods’ Private Wealth Services Group,
here. If you would like to discuss matters in detail, please contact the