The Federal Estate Tax currently allows a person that has not used their life time gift tax exemption to give away money assets up to the Federal Estate Tax Exemption at death
without charging any tax on that amount. The Federal Estate Tax Exemption for 2012 is $5.12 million which means that in 2012 only estates valued over $5.12
million will be charged a Federal inheritance tax and those estates over $5.12 million will only pay a 35% Federal inheritance tax on assets over the $5.12 million exemption.
For example a person that has an estate valued at $7.12 million and has not used any of their life time gift tax would be subject to the Federal Estate Tax on $2 million and would have to pay approximately $700,000.00 in estate taxes.
However, it should be kept in mind that for 2012 the Federal Estate Tax Exemption has become portable. As such, each spouse has $5.12 million that can in many case be added together to create a $10.24 million Federal Estate Tax Exemption. In other words, the estate of a deceased spouse can transfer to the surviving spouse any portion of the federal estate tax exemption that it does not use. The surviving spouse’s estate can then add that amount to the exemption it is entitled to, increasing the total amount that can be passed on to heirs tax free.
For example a married couple that has an estate valued at $10.24 million, has not used any of their life time gift tax, and properly uses the portability of the Federal Estate Tax Exemption would not have to pay any Federal estate tax. Likewise, the same married couple with an estate of $12.24 would be subject to the Federal Estate Tax on $2 million and would have to pay approximately $700,000.00 in estate taxes.
Families interested in protecting their wealth should stay advised as to changes in the law that could impact their ability to protect their family's wealth. One such change may be the change in the Federal Estate Tax Exemption that may automatically take place at the end of 2012, unless new legislation is passed.
For example a person that has an estate valued at $7.12 million and has not used any of their life time gift tax would be subject to the Federal Estate Tax on $2 million and would have to pay approximately $700,000.00 in estate taxes.
However, it should be kept in mind that for 2012 the Federal Estate Tax Exemption has become portable. As such, each spouse has $5.12 million that can in many case be added together to create a $10.24 million Federal Estate Tax Exemption. In other words, the estate of a deceased spouse can transfer to the surviving spouse any portion of the federal estate tax exemption that it does not use. The surviving spouse’s estate can then add that amount to the exemption it is entitled to, increasing the total amount that can be passed on to heirs tax free.
For example a married couple that has an estate valued at $10.24 million, has not used any of their life time gift tax, and properly uses the portability of the Federal Estate Tax Exemption would not have to pay any Federal estate tax. Likewise, the same married couple with an estate of $12.24 would be subject to the Federal Estate Tax on $2 million and would have to pay approximately $700,000.00 in estate taxes.
Families interested in protecting their wealth should stay advised as to changes in the law that could impact their ability to protect their family's wealth. One such change may be the change in the Federal Estate Tax Exemption that may automatically take place at the end of 2012, unless new legislation is passed.
