Salt Lake City ESTATE AND GIFT TAX
ESTATE AND GIFT TAX
Few provisions in the Tax Code have been as uncertain in their long-term fate
as the federal estate tax. In 2001, Congress set in motion a gradual reduction
of the federal estate tax rate and repealed it for estates of decedents dying
in calendar year 2010.
Under the 2010 Tax Relief Act, federal estate taxes again applied to estates of
decedents dying after December 31, 2009, and before January 1, 2013 (although
estates of decedents dying in calendar year 2010 could opt out of the federal
estate tax and apply a modified carryover basis regime). President Obama has
proposed extending the federal estate and gift tax under parameters in effect
for calendar year 2009 for estates of decedents dying after December 31, 2012.
That level would set the estate tax exclusion at $3.5 million with a 45 percent
rate and the gift tax lifetime exclusion of $1 million.
IMPACT.
Absent Congressional action, the maximum estate tax rate is scheduled to be 55 percent
for estates of decedents dying after 2012 with a $1 million combined estate and
gift tax exclusion amount. Opponents of the estate tax continue to maintain
that it hurts family-owned businesses to the detriment of the economy.
IMPACT.
For 2012, a unified estate and gift tax exclusion stands at $5.120 million,
with a 35 percent rate imposed on the excess. The exclusion effectively becomes
$10.24 million for married couples. Depending upon a wealthy individual’s
estate plan and the type of assets held, some practitioners recommend making
large gifts before 2013 to take advantage of the $5.12 million/$10.24 million
amounts that may be transferred gift-tax free before 2013. The re-election of
President Obama makes the repeal of the estate tax or a higher exclusion
unlikely.
Comment
President Obama has also proposed to extend the generation skipping transfer
(GST) taxes at parameters in effect for calendar year 2009.
Comment
The 2010 Tax Relief Act also provided for portability, which increases the
surviving spouse’s lifetime exclusion for estate and gift taxes by the portion
of the deceased spouse’s exclusion that is unused at the deceased spouse’s
death. Portability is scheduled to sunset after 2012. President Obama has
proposed to extend portability. (Salt Lake City ESTATE AND GIFT TAX)