Tax Issues
The taxes applicable to estates (federal estate tax, state estate and/or inheritance tax, generation skipping transfer tax, gift tax, fiduciary income tax) are complex, always changing and frequently avoidable. Currently, if your estate will exceed $5 million on or after January 1, 2011, your estate will be subject to estate taxes. It is imperative that you get professional advice in preparing your estate plan.
As a very general overview, under the federal estate tax laws, an unlimited amount can be passed tax free to a U.S. citizen spouse under the “unlimited marital deduction” and an amount equal to the “applicable exclusion” can be passed to a nonspouse beneficiary free of the federal estate tax. There are also exemptions and exclusions from the gift and generation skipping transfer taxes.
The following chart sets forth the basic exclusion amount under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act for years of 2011 through 2013, at which point the rates under the act are repealed (for more on the Act, see the following sections on planning for mid-size and large estates).
Estate, Gift, and GST Tax Exemptions Amounts/Highest Tax Rates
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In addition to the basic exemption amount showin in the above table which can apply to gifts made during your lifetime, you are allowed a $13,000 per recipient annual gift tax exclusion. Married couples can gift $26,000 per recipient per year.
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