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ESTATE & GIFT TAXES
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ESTATE AND GIFT TAX LAWS
Economic Growth and Tax Relief Reconciliation Act of 2001 |
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In 2001, Congress passed the Economic Growth and Tax Relief Reconciliation Act of
2001 (EGTRRA 2001), which amended the estate tax laws. Although the estate tax
currently affects only the largest of estates-about two percent of those who die
each year-changes effective in 2001 will eliminate the estate tax completely by
2010. The "estate tax repeal," as it is called, is actually more of a phase-out
than a repeal. The changes to the estate and gift tax laws included within
EGTRRA 2001 entail phase-out times that begin in 2002 and continue for 10 years.
The gift tax has not been repealed, however. |
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The following is a table which shows how the exemptions will increase: |
| Year |
Estate Tax
Exemption |
Gift Tax
Exemption |
Highest Estate
& Gift Tax Rate |
| 2002 |
$1M |
$1M |
50% |
| 2003 |
$1M |
$1M |
49% |
| 2004 |
$1.5 M |
$1M |
48% |
| 2005 |
$1.5 M |
$1M |
47% |
| 2006 |
$2M |
$1M |
46% |
| 2007 |
$2M |
$1M |
45% |
| 2008 |
$2M |
$1M |
45% |
| 2009 |
$3.5M |
$1M |
45% |
| 2010 |
Estate Tax
Repealed |
$1M |
45%
Top individual income tax rate
(gift tax only) |
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This may sound confusing because it is. The new law is extremely complicated and
is certain to test the intellectual stamina of the most experienced and
enthusiastic estate planning professionals.
Since the end result is a law
that will have a different result for different taxpayers in different years,
your estate plan should be reviewed and revised because some of the basic
principles that have guided estate planning for many years no longer hold true.
Unless future adjustment is made to EGTRRA 2001, the estate and gift
tax system returns in 2011 to the $1 million applicable exemption amount as
shown earlier for 2002. |
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