With the new year upon us, it’s a good time to review the federal estate and gift tax rules in order to utilize them to their maximum effect. Taxpayers should also be aware that certain beneficial gift and estate tax laws may expire at the end of this year and revert back to the pre-Economic Growth and Tax Relief Reconciliation Act of 2001 laws if Congress does not extend them, so taxpayers may also want to consider this when making decisions. This article will briefly explain some of the most basic current federal estate and gift tax rules, and highlight some of the laws that may sunset at the end of 2012.
Unified Federal Estate and Gift Tax Exemption
The unified federal estate and gift tax exemption for estates of individuals who die in 2012, or who make gifts this year is $5.12 million per spouse. For 2011, the unified federal estate and gift tax exemption was $5 million per spouse.
If Congress does not extend the unified gift and estate tax exemption, it will automatically be reduced to $1 million beginning 2013. Taxpayers who may be subject to gift and estate taxes at such levels should thus take heed.
Federal Estate and Gift Tax Rates
Currently, both the estate and gift tax rates are a flat 35%. If Congress does not extend these rates, the estate tax rates will begin at 41%, and reach a maximum of 60% in certain cases (55% top rate plus a 5% surcharge on estates over a statutory amount), and the gift tax will have a maximum 55% rate. The Generation-Skipping Transfer (GST) tax rate will also revert to a 55% rate (up from the current 35% rate).
Under current tax law, surviving spouses of married individuals who die in 2011 or 2012 may use federal estate and gift tax exemptions that their spouses did not take during their lives. However, the ability of taxpayers to use portable exemptions will also sunset at the end of this year if Congress does not extend them. Thus, taxpayers who may be facing estate and/or gift taxes may want to keep this in mind when planning if such unfortunate events occur.
Contact Sherayzen Law Office For Help With Your Estate and Tax Planning
Obviously, this article only provides a very small amount of some of the basic gift and estate tax rules currently in place. It does not offer any type of legal advice and should not be relied upon in determining your particular tax position. Please contact our experienced tax office for legal help with your estate and tax planning.