|Overview of 2011 and 2012 Federal
Estate Tax Laws
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation
Act was signed into law by President Obama on December 17, 2010. This
new law provides sweeping changes to the rules governing federal estate
taxes, gift taxes and generation-skipping transfer taxes for the 2010,
2011 and 2012 tax years.
Here is a summary of what the new law provides for the estates of
decedents who die in 2011 or 2012:
1. Sets new and unified estate tax, gift tax and generation-skipping
transfer tax exemptions and rates. For 2011 and 2012, the federal estate
tax exemption will be $5 million and the estate tax rate for estates
valued over this amount will be 35%. The estate tax has also become
unified with federal gift and generation-skipping transfer taxes such
that the gift tax exemption and generation-skipping transfer tax
exemption will be $5 million each and the tax rate for both of these
taxes will also be 35%.
2. Offers "portability" of the federal estate tax exemption between
married couples. In 2009 and prior years, married couples could pass on
two times the federal estate tax exemption by including "AB Trusts" in
their estate plan. The new law eliminates the need for AB Trust planning
for federal estate taxes by allowing married couples to add any unused
portion of the estate tax exemption of the first spouse to die to the
surviving spouse's estate tax exemption. This will effectively allow
married couples to pass $10 million on to their heirs free from estate
taxes with absolutely no planning at all. Note that portability was not
applied retroactively to January 1, 2010, and as it now stands is only
available for deaths that occur during the 2011 and 2012 tax years.
Hopefully this provision will be included in future updates of the
Federal Estate Tax.
The Federal Gift Tax also provides for a $5,000,000 exemption for the
next two years. Hopefully, this too will be extended. And, the old
annual exclusion of $13,000 per donee remains in effect.
Overview of California Inheritance Tax
There is no California Inheritance Tax