Congress has reinstated the federal estate with a $5 million Basic Exclusion Amount and 35 percent maximum tax rate for a two-year period, 2011-12.


Also, it has added a new Deceased Spousal Unused Exclusion (DSUE) that creates "portability" between spouses for any Basic Exclusion Amount not used on the first spouse's death.  These changes will allow estates of up to $5 million (for individuals) or up to $10 million (for married couples) to avoid federal estate taxes – but technically only for estates created before the law expires on 12/31/12.


Fortunately, clients don't have to die so soon to benefit. They can take advantage of an expanded lifetime gift tax exemption of $5 million per person to make gifts now. Whatever part of this exemption they use will reduce the Basic Exclusion Amount available (at death) dollar-for-dollar. Any client who previously had exhausted the $1 million lifetime gift tax exemption will now receive another $4 million to use through 12/31/12. (Note: The annual gift tax exclusion per donor, per person, remains at $13,000 for 2011.)

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