How will recent changes in the federal estate tax affect my planning?
Under the current federal law, the federal exemption from estate tax for transfers made to non-spouses upon an individual’s death is $2 million. That exemption will increase to $3.5 million as of January 1, 2009. Transfers made to spouses (unless the spouse is not a U.S. citizen) are fully exempt from federal estate and gift tax. Therefore, as of today, with proper planning, a husband and wife can transfer $4 million tax free to their children. As of January 1, 2009, a husband and wife will be able to pass $7 million tax free to their children. The Generation-Skipping Tax exemption for transfers to grandchildren will increase accordingly as well. However, you should be aware that the gift tax exemption has been capped at $1 million and will not change, notwithstanding the estate tax changes. The estate tax is scheduled to be completely repealed as of January 1, 2010. However, as of January 1, 2011, the estate tax will be fully reinstated with the $1 million exemption. There are literal
