Shoreline Wealth and Investment Mangement  

Sign up and receive
the free report
’27 Tips for Choosing
a Financial Advisor’

Recent Estate Tax Law

The Recent Estate Tax Law

On May 26, 2001, Congress passed a bill that reforms the transfer tax system and eventually repeals the estate tax. The bill was signed into law by the president on June 7th.

Under the new legislation:
The top transfer tax rate is reduced gradually from 55% to 35%, with an initial reduction of the top rate to 50% for decedents dying and gifts made in 2002.

The amount one can pass to his or her heirs at death without estate tax increases is as follows:
$1,000,000 for decedents dying in and after 2002
$1,500,000 for decedents dying in and after 2004
$2,000,000 for decedents dying in and after 2006
$3,500,000 for decedents dying in and after 2009
For decedents dying during 2010, the estate tax would be completely repealed.

The amount one can pass to his or her heirs by lifetime gift increases to $1,100,000 beginning January 1, 2002. However, the law does not repeal the gift tax so lifetime gifts in excess of $1,100,000 would still be subject to tax.

The generation-skipping transfer ("GST") tax is repealed for all gifts or bequests made after 2009. As of January 1, 2011, the GST allowable amount is $1,100,000 with a transfer tax rate of 55%.

The current step-up in income tax basis regime is modified for decedents dying after 2010. Instead of property passing by bequest receiving a full market value income tax basis at death, the income tax basis for such property generally would be the decedent's carry-over basis. However, the law does continue to allow a step-up in income tax basis for up to $1,300,000 of appreciation in property passing at death and an additional $3,000,000 of appreciation in property passing at death to a surviving spouse.

Questions EVERY Diversified Investment Advisors should ask you...
SWIMLLC vs. Warren Buffet... who performs better?
Sunset Provision
This new legislation contains a "sunset" provision whereby all the provisions of the bill automatically terminate on December 31, 2010. Therefore, the transfer tax reform will only be effective for nine years beginning January 1, 2002, and ending December 31, 2010. Thus, estate taxes would only be repealed in total for decedents dying in the year 2010. As a result, the bill provides that today's transfer tax system will resume on January 1, 2011.

Future Legislation
Some politicians suggest that the current bill temporarily repealing the estate tax might be re-enacted in January of 2011, or that the sunset provision might be removed by later legislation if the budget surpluses materialize as projected. However, any future estate tax legislation will likely be enacted under a different Congress and possibly a different President. Additionally, the revenue loss estimates for estate tax repeal rise dramatically in the years following the current repeal due to the aging of the current population and continued accumulation of wealth among that generation. Therefore, it is unlikely that the estate tax repeal will be re-enacted or that the sunset provision will be removed by a future Congress.

Shoreline's Competitive Edge
Whatever your estate planning need, Shoreline Wealth and Investment Management can assist you in obtaining the best in tax planning advice.

For more information:
If you'd like more information about how diversified investment advisors can help you achieve your financial objectives through personalized wealth or retirement and risk management strategies, please contact us. We welcome the opportunity to discuss your unique needs and how we may best meet them.

This page (formatted for versions 10.0 and higher of Internet Explorer) is updated regularly so check in from time-to-time to see new articles and updates. You can click on any underlined words on each page to see a specific wealth management topic in the left margin of each page.

Charles M. Bloom, Registered Principal offers securities and advisory services through Centaurus Financial, Inc. - Member FINRA and SIPC - 775 Avenida Pequena, CA, 93111 (mailing address: 3905 State Street Suite 7173, Santa Barbara, CA, 93105) - CA Life Insurance License No. 0A52786 - Centaurus Financial, Inc. and Shoreline Wealth & Investment Management are not affiliated companies.

The information contained in this web site is neither an offer nor solicitation of any security or service.


Shoreline's Home Page
Return to home page


“Outstanding program ... a role model to follow”

- International Association of Financial Planners

Sign up and receive
the free report
’27 Tips for Choosing
a Financial Advisor’
  Shoreline Wealth and Investment Management - Phone: 805.886.3624 - E-Mail: