INCREASE IN ESTATE TAX EXEMPTION AMOUNT
By Joel Luber, Principal
The exemption from Federal estate taxes has increased significantly since 1997 while the estate tax rate has significantly decreased. Below is a chart that shows the changes in the estate tax exemption and estate tax rate from 1997 through 2013.
Tax years 2010 through 2012 are based on the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act ("TRA 2010") that was signed into law by President Obama on December 17, 2010. This law is only good for two years and so will sunset on December 31, 2012, meaning that on January 1, 2013, the federal estate tax exemption and rate will default to the numbers that were in effect in 2001/2002.
| Year | Estate Tax Exemption | Top Estate Tax Rate |
| 1997 | $600,000 | 55% |
| 1998 | $625,000 | 55% |
| 1999 | $650,000 | 55% |
| 2000 | $675,000 | 55% |
| 2001 | $675,000 | 55% |
| 2002 | $1,000,000 | 50% |
| 2003 | $1,000,000 | 49% |
| 2004 | $1,500,000 | 48% |
| 2005 | $1,500,000 | 47% |
| 2006 | $2,000,000 | 46% |
| 2007 | $2,000,000 | 45% |
| 2008 | $2,000,000 | 45% |
| 2009 | $3,500,000 | 45% |
| *2010 | $5,000,000 or $0 | 35% or 0% |
| 2011 | $5,000,000 | 35% |
| **2012 | $5,120,000 | 35% |
| 2013 | $1,000,000 | 55% |
*The heirs of decedents who die in 2010 will have the choice to use the $5,000,000 estate exemption/35% estate tax rate or $0 estate tax exemption/0% estate tax rate coupled with use of the modified carryover basis rules.
**TRA 2010 provides that the estate tax exemption, lifetime gift tax exemption, and generation-skipping transfer tax exemption will be indexed for inflation in 2012, hence the $120,000 increase in the 2012 estate tax exemption.