THIS IS WHY YOU NEED TO TALK TO YOUR ESTATE PLANNER TODAY.
But here’s the rub. Congress in 2012 raised the estate-tax exemption to $5 million per person, indexed for inflation. The exemption in 2015 is $5.43 million with a top tax rate of 40%. And the new law also allows the surviving spouse to use any part of the exemption that was unused by the first spouse to die. That means a couple can protect as much as $10.86 million in 2015.
So what’s the problem? Assets that are passed through an estate get an enormous tax break. Their tax basis is “stepped up” to the market value on the day the owner died. Any capital gains that built up during his or her lifetime become tax-free. Only appreciation after the date of death is taxable to the heir.
But assets in bypass trusts don’t get the capital-gains tax break. Heirs don’t enjoy that step-up in basis, and that’s what estate lawyers are worrying about now.