2002-50%

2003-49%

2004-48%

2005-47%

2006-46%

2007-45%

2008-45%

2009-45%

The table above shows the amount of assets an individual may transfer to another individual (or individuals) at their death known as their 'Lifetime Exemption or Credit' before paying the Federal Estate Tax. The tax is calculated on the 'Adjusted Taxable Estate'. As noted the amount of the 'Exemption' is scheduled to increase until 2010, where it is eliminated for deaths occurring in calendar year 2010 only. Since a 'Sunset Provision' was included in this tax law change, unless something is done before 2011 to extend the new law. The Federal Estate and Gift Tax law will revert to the old laws in place just prior to when these changes were made.

2002-50%

2003-49%

2004-48%

2005-47%

2006-46%

2007-45%

2008-45%

2009-45%

The table above shows the marginal bracket imposed each year for both Federal Estate and Gift Tax transfers, which exceed the Exemption amount allowed. The maximum marginal Gift Tax rate will reduce until 2011, where it will then become equal to the top marginal income tax rate at that time (or 35%).

There are a couple of exceptions to this. The first exception is for assets being transferred to your 'spouse' during your lifetime or at death. Your spouse (if they are a US Citizen) has an 'Unlimited Marital Exemption or Credit', meaning any amount of assets may be transferred during your lifetime to a spouse (or at death) without paying a tax. However, leaving all your assets to your spouse outright is not normally good Estate Planning.

Also beginning January 2, 2002, the Lifetime 'Gift Tax Credit/Exemption' (other than to a spouse who is a US citizen which is unlimited) will be $1,000,000. Meaning that you may transfer during your lifetime up to $1,000,000 of assets to one or more persons, without paying a tax.

In addition, 'Qualifying Gifts' may be made to individual(s) up to $12,500 per year/per person for 2007. If your spouse also agrees to make a gift, the amount may be doubled to $25,000 in 2007. Annual 'Gifting Programs' is a smart 'Estate Planning' and a good way to keep Estate's from growing too much each year, which will only result in more taxes to pay!

In addition most States impose their own death taxes, which include Estate and Inheritance taxes. The Federal Estate Tax has now phased out the 'Credit Estate Tax' (CET) for State Estate taxes paid to a State. Therefore States now directly collect taxes from decedents Estates and their is no longer a credit for these taxes paid directly to the States on the Federal Estate Tax Return.

© 2002 e.Insurance-Tools