Estate Tax Exemption
The "Economic Growth and Tax Relief Reconciliation Act of 200l" that was signed into law on June 7, 2001 made significant changes to the estate and gift tax laws. Under the new law, the individual estate tax exemption will increase beginning with the year 2002 as shown on the following chart:
Estate Tax Exemption Amount
|
Year of Death
|
Estate Tax Exemption
|
|
2002 – 2003
|
$1,000,000
|
|
2004 – 2005
|
$1,500,000
|
|
2006 – 2008
|
$2,000,000
|
|
2009
|
$3,500,000
|
|
2010
|
Estate Tax Repealed
|
|
2011
|
$1,000,000
|
In addition, the new law will reduce the maximum top estate tax rate from 55% to 50% beginning in 2002, and will gradually reduce the top estate tax rate to 45% in 2009. However, the repeal of the estate tax does not take effect until 2010, and the repeal may last for only one year. If, in 2011, Congress does nothing the estate tax will be reinstated and the estate tax exemption will return to $1 million. This automatic "sunset" provision was put in place in case the anticipated budget surpluses do not materialize on schedule or fall short of what was projected.
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