2011 Brings Good and Bad News for Your Estate Plan
You may already have established an estate plan, but the new year has brought very significant changes in the law as it applies to estate planning. We are informing you of how these changes may affect your current estate plan and what steps you may need to take to ensure your plan will still provide the results you initially intended when preparing your estate plan. If you have not yet established a plan, now may be a good time to do so.
There are two primary changes to the law that could affect you. First, the federal exemption amount was raised to $5 million, meaning that any estate with a net worth of less than $5 million will not be subject to any federal estate tax for deaths occurring between January 1, 2011 and December 31, 2012. Second, for married couples, federal law now allows that any amount of exemption not used by the first spouse’s estate can be added to the second spouse’s exemption, under certain circumstances.
In response to these changes, effective January 11, 2011, Illinois’ legislature has reinstated its own estate tax for any estate owning assets in Illinois. Illinois now has a $2 million exemption and all federal estate taxable assets above that amount are taxable at a rate of up to 16% at the time of death. So without an estate plan which accounts for these changes, you or your heirs may end up paying the State of Illinois taxes on your estate, despite being under the federal exemption.
We are recommending that if you have not had your estate plan reviewed in the last five years, have had changes in your family or beneficiaries since establishing your plan, or have an estate valued over $2 million, it is important that we or a qualified estate planning attorney review your existing estate plan. Please note that in calculating your estate, you must include the value of real estate assets, face value of life insurance policies, and all other property in addition to your liquid assets.
Additionally, the Illinois Power of Attorney forms for both property and health care have been updated, with the new forms effective July 2, 2011. The law does not require these forms to be updated, but using the new forms may be beneficial.
Please do not hesitate to contact our office with any questions you have regarding your current estate plan or power of attorney.