Update on the Federal Estate Tax Exemption

Two year reprieve: Federal estate tax exemption is now $5,000,000.

After much debate and years of delay, the “Lame Duck” Congress voted to extend the Bush-era tax cuts which were set to expire on December 31, 2010. In particular, the bill signed by President Obama on December 17, 2010, gave a two year reprieve on the federal estate tax exemption. The estate tax was scheduled to return on January 1, 2011 with an exemption of $1,000,000 and a tax rate of 55% on amounts above the exemption. The tax package raised the exemption for the next two years to $5,000,000 with a reduction in the tax rate to 35%.

Everyone will still have to follow Congress’ efforts on tax reform over the next two years. We could easily find ourselves in a similar position in December of 2012 to that in which we found ourselves in December of 2010.

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