The federal estate tax gradually phased-out until there was no estate tax in 2010. The unified credit or the amount that an individual may pass free of estate or gift tax (either at death or during life) was:
EGTRRA
Year Top Estate Tax Rate Exemption Amount
2002 50% $1,000,000
2003 49% $1,000,000
2004 48% $1,500,000
2005 47% $1,500,000
2006 46% $2,000,000
2007 45% $2,000,000
2008 45% $2,000,000
2009 45% $3,500,000
2010 repealed N/A
There was a full repeal of the estate tax in 2010. Simultaneously the plan reduced the top estate and gift tax rates gradually over the same period from 50% to 45%. However, the full repeal is only in effect for the year 2010. Congress provided a temporary fix through 2013 by passing the Jobs Creation Act of 2010. The Act reinstated the estate tax, but provided for a $5,000,000 exemption and a 35% tax rate.
Jobs Creation Act of 2010
Year Top Estate Tax Rate Exemption Amount
2011 35% $5,000,000
2012 35% $5,000,000
2013 35% $5,000,000
The Jobs Creation Act reinstated the estate tax through 2013 and reinstated the stepped-up basis for assets given at death. It also allows for transferability of unused estate tax exemption to a surviving spouse.
The Act reunified the estate and gift taxes, increasing the amount a person may gift tax-free during their lifetime to $5,000,000 and decreasing the tax rate to 35% for any amount over $5,000,000. The current annual exclusion remains $13,000 per individual.
For decedents dying in 2010, the Jobs Creation Act allows the estate to choose between either the 2010 or 2011 estate tax laws.
The estate and gift tax law is set until 2013, but Congress will have to revisit the issue again. The constant state of flux makes “planning” your estate essential. Attorney Silberstein can help you plan your estate to provide maximum flexibility in uncertain times.