Under current federal law (effective
for persons dying in 1999), estates
of less than $675,000.00 (the "exemption
amount") are not subject to a federal
estate tax. The exemption amount
will increase annually until the
year 2006, when it will reach $1,000,000.00.
See below chart.
|
Year
of Death
|
Amount
Which Can Be Transferred Free
of Federal Estate Tax
|
|
1998
|
$625,000
|
|
1999
|
$650,000
|
|
2000
|
$675,000
|
|
2001
|
$675,000
|
|
2002
|
$700,000
|
|
2003
|
$700,000
|
|
2004
|
$850,000
|
|
2005
|
$950,000
|
|
2006
|
$1,000,000
|
Estates
in excess of the exemption amount
are assessed a federal estate tax
starting at a 37% rate and climbing
as high as 55%. The federal estate
taxes on a $1.25 million estate
will be approximately $235,000.00.
The value of your estate for federal
estate tax purpose includes, but
is not limited too, your home, bank
accounts, investments, business
interests, retirement and profit-sharing
plans, and the face value of life
insurance which you own. By the
use of trusts which are sometimes
referred to as credit shelter trusts,
a husband and wife can shelter an
amount equal to their combined
exemption amounts from federal estate
taxes (for example, for persons
dying in 2002 the combined amount
would be $1,400,000.00).
