Federal Estate Tax - Unified Credit
There exists several credits that may be used against the tentative tax (= the sum of the taxable estate + the adjusted taxable gifts), the most important of these credits is the “Unified Credit”. The Unified Credit is best characterized as an exemption equivalent or exempted value with respect to the sum of the taxable estate and gifts during the decedent’s lifetime.
A person who dies during calendar years 2006, 2007 or 2008 will be entitled to an applicable exclusion amount of $2,000,000. Accordingly, if the sum of the taxable estate and adjusted taxable gifts made during the lifetime of the deceased equals $2million or less, there is no federal estate tax due. The applicable exclusion is set to increase to $3,500,000 in 2009. However, the Economic Growth and Tax Relief Reconciliation Act of 2001 “sunsets” (e.g. ends) in 2011 and the estate tax reappears at the previous amount of $1,000,000. The “sun setting” of the Economic Growth and Tax Relief Reconciliation Act of 2001 is a topic of political discussion and has been discussed during the current presidential campaign. It is likely that should John McCain win the election, the act will will be extended and the exempted amount increased. Should Hillary Clinton or Barack Obama win the election it is possible that the exemption rate will be calculated on a progressive scale. In sum, the act is subject to the political process.
If You Die During | Top Estate Tax Rate | Applicable Unified Credit | Equivalent Exemption |
2003 | 49% | 345,800 | 1,000,000 |
2004 | 48% | 555,800 | 1,500,000 |
2005 | 47% | 555,800 | 1,500,000 |
2006 | 46% | 780,800 | 2,000,000 |
2007 | 45% | 780,800 | 2,000,000 |
2008 | 45% | 780,800 | 2,000,000 |
2009 | 45% | 1,455,800 | 3,500,000 |
2010 | Repealed for 1year | Unlimited | Unlimited |
2011 | 55% | 345,800 | 1,000,000 |