U.S. Estate Tax Update for 2012

U.S. Congress agreed during December of 2010 on status of the U.S. estate tax for 2011 and 2012:  

U.S. estate tax exemption for individuals is now 5 million dollars. This is up from 3.5 million in 2009 and $600,000 in 2000

The lifetime U.S. gift tax exemption is now 5 million dollars, which is up from 1 million dollars in 2010.

The U.S. estate and gift tax rate is now 35%, and any estates or gifts larger than 5 million dollars will be taxed at a rate of 35% for every dollar above the 5 million dollar threshold.

Portability of U.S. estate tax exemption 

Married couples might not need to split up their estate when one spouse passes in order to take advantage of both spouses estate tax exemption.  If you and your spouse are worth ten milllion dollars, the surviving spouse can still directly inherit the deceased spouses share of the estate without having to worry about not taking advantage of the deceased spouses's exemption. When the surviving spouse passes, their estate can now not only use the current exemption but also the unused portion of the estate tax exemption not used by the deceased spouse to whom they were last married. 

U.S. estate tax law is scheduled to expire at the end of 2012 unless Congress and the President agree on renewing that. 

Married persons should make sure that their living trust is set up in such a way to minimize the impact of the estate tax regardless of what the exemption amount turns out to be starting on January 1, 2013.   

And those married pesons who set up their trusts when the estate tax exemption was $600,000 should also have their trusts reviewed now, because they might contain cumbersome provisions that are no longer necessary.