Estate & Gift Taxes TAX RATES 41% TO 50% EXCEPTIONS TO TAX: INCREASING ESTATE TAX EXEMPTIONS For 2002 and 2003, each person is allowed a one-time estate and gift tax exemption of $1 million for life-time gifts of assets included in their estate at death. Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax exemption is increased to $1.5 million for 2004-2005, $2 million for 2006-2008, $3.5 million for 2009, with the repeal of the estate tax in 2010; with the exemption for gift taxes remaining at $1 million for future years. THE INCREDIBLE DISAPPEARING & REAPPEARING ESTATE TAX However, the repeal of estate taxes may be only temporary because (incredibly!) Congress also added a "sunset" clause causing estate taxes to be restored in 2011 by reinstating the $1 million estate tax exemption. Accordingly, if you are unlucky enough to die in 2010, then perhaps your heirs will sidestep the estate tax yet, if you make it to 2011, the entire tax is scheduled to be back with just a $1 million exemption. As such, this sunset provision will keep the debate on the estate tax brewing for many years. However, this attorney believes it is politically unlikely that estate taxes will be reinstated after 2010 or, if this does occur, the exemption will be raised to at least $3 million. THE MARITAL DEDUCTION Gifts to your spouse are exempt from gift tax. Inheritances left to your spouse are exempt from estate tax. QUICK RULES OF THUMB If you are single and your estate at death (including life insurance) will be less than $1 million (for 2002-2003), you do not have an estate tax problem. If you are married and your combined estates at death (including life insurance) will be less than $2 million (for 2002-2003), you do not have an estate tax problem IF you plan correctly using the unified credit trust in your will or living trust.

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