March 13, 2018

What’s EGTRRA?

The Economic Growth Tax Relief Reconciliation Act (EGTRRA) implemented in 2001, made a number of changes to the estate and gift tax system. So, what does that mean to you today? If you have an estate plan in place or are planning on creating one, it may mean a lot!

Here’s what EGTRRA did:

  • When EGTRRA was passed in 2001, it gradually reduced the rate at which large estates were taxed. The size of the estate excluded from the tax rose each year from $1 million to $3.5 million, while the tax rate also decreased from 55% to 45%.
  • In 2010, EGTRRA was subject to a sunset provision. This completely removed the estate tax for one year.
  • If Congress does nothing to reinstate EGTRRA in 2011, the rates will return to the pre-EGTRRA rates, with a $1 million exemption and a 55% tax rate.
  • The annual gift rules were not affected by the sunset of EGTRRA. Both before and after EGTRRA, a person may give a lifetime gift of up to $13,000 per donee per year and not pay taxes on it. This means that a person with three children could give $13,000 to each of her three children, for a total of $39,000 per year, without paying taxes on that total gift amount.

So what does all this legal mumbo-jumbo mean to you?

  • Your estate could be significantly impacted by EGTRRA. If Congress doesn’t act, your current estate plan may not account for the reversion back to pre-EGTRRA rates. Contact us to schedule a free estate plan review to be sure your plan is up to date.

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