Estate Taxes

Federal law imposes taxes on an individual's estate. However, there are three permissible deductions/credits that can provide relief:

1. For married couples, at the death of the first spouse, there is an unlimited marital deduction for qualifying property left to the surviving spouse.


2. The law allows a full deduction from the estate for amounts distributed to a charitable beneficiary.


3. The law permits individuals, or in marriage, each spouse, a credit (exemption) to offset taxes payable against their estate. As of January 1, 2010, the estate taxes have been repealed for one year. Unless Congress acts, the estate tax will be reinstated in 2011 with a 55% rate and a $1 million credit or exemption. In other words, beginning in 2011, in the absence of any estate planning, at the death of the second spouse (or at death for singles), federal law permits $1 million to be distributed to heirs free from estate taxes. Amounts above the $1 million threshold are subject to estate taxes. In the case of married couples, this impact can be reduced substantially with appropriate estate planning, through the creation of a bypass trust.

Please note that legislation enacted in 2001 incrementally increased this exemption from $1 million in 2001 to $3.5 million in 2009. This legislation eliminated all federal estate taxes in the year 2010. However, this is subject to what is called a "Sunset" rule, and therefore, unless Congress revises the law prior to 2011, the exemption will revert back to the $1 million level per spouse.

It is very hard to predict what action Congress will take in the near future. Therefore, at this time, we encourage individuals to be conservative in their approaches in their estate planning, and assume an exemption in the range of $1 - $3.5 million. We continue to monitor this situation, and will update this site to reflect any changes.

Information on this site is NOT intended for legal advice. See Disclaimer.

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