What to do if Bush tax cuts expire
Watch out for the resurrected estate tax
The U.S. Treasury took a big hit this year because of the expiration of the estate tax. A Texas tycoon and New York Yankees owner George Steinbrenner were just two of the billionaires whose heirs didn't have to worry about paying federal taxes on the value of the property their relatives left behind.
In 2011, however, the estate tax comes back to life, at a higher 55 percent tax rate and targeting smaller estates, those worth more than $1 million.
If you fear that Congress won't increase the estate tax exemption amount -- it was $3.5 million in 2009 when the tax was last in place -- you can take some steps now to reduce your estate's taxable value.
Start by giving away some of your wealth. You and your spouse can each give up to $13,000 in cash or other assets to as many individuals as you want, without any tax consequences.
If you want to give substantially more, you can, but once you've given away $1 million, you'll have to pay the gift tax, which is 35 percent. Still, that's 20 percent lower than the tax rate at which the estate tax is set to resume in 2011.