Introduction

On December 17, 2010 President Obama signed into law "The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010" (the "2010 Act"). The 2010 Act made major changes to the federal transfer tax system, which includes the estate tax, the gift tax, and the generation skipping transfer tax (the "GST tax"). These changes will have a tremendous impact on future estate planning, and they create some critically important decisions for estates of persons who died in 2010. This Alert summarizes those changes. Other matters covered by the 2010 Act – such as the extension of the "Bush income tax rates" – are not covered by his Alert.

As a preliminary matter, it is essential to understand that the changes made by the 2010 Act will only apply for two years – for 2011 and 2012 only. Unless Congress acts to make these changes permanent (or extends them even further), we will once again face the prospect of reverting back to the transfer tax laws that applied in 2001. Nevertheless, it is necessary that clients understand the new transfer tax laws and plan accordingly.