Late in 2010 Congress passed temporary tax law changes which will be in force for the next two years.
For 2011 and 2012 there is a $5 million exclusion amount for individuals. This means a person can pass $5 million at death to anyone estate tax free.
With proper estate tax planning married couples can pass up to $10 million estate tax free.
The tax on amounts over the exclusion amount is 35%.
There is also a portability feature to the $5 million exclusion amount for married couples. It’s called the Deceased Spousal Unused Exclusion Amount (DSUEA). It permits a married decedent’s unused portion of their exclusion amount to carry forward and be added to the surviving spouse’s $5 million exclusion amount. This is available only from the estate of a spouse who dies in 2011 or 2012. So for the survivor of a married couple their total exclusion amount would be $5 million plus the DSUEA.
During 2011 and 2012 individuals can make total life time gifts up to $5 million. Under the previous law the total amount was $1 million. This considerable difference means a significant amount of assets can be transferred without gift tax over the next 2 years.
Generation Skipping Tax (GST)
The GST exclusion amount is the same as the estate tax exclusion amount of $5 million.
There are significant tax planning opportunities stemming from the new tax legislation. If you would like to discover how this new legislation applies to your estate contact us at (630) 443-8575.