By: Martin M. Shenkman, CPA, MBA, JD
This is the amount of property you can give away without triggering any estate tax. On the federal level in 2006 you can gift or bequeath a maximum of $2 million in assets without triggering tax (only $1 million while you are alive, but up to another million or $2 million at death). This amount is referred to as the "applicable exclusion" amount. Under prior law it was called the "unified credit". This amount increased to $5 million in 2010-2012. But the 2010 Tax Act made a number of other changes, some noted below. This is generally the amount which a client can bequeath at death without triggering an estate tax (to the extent the client did use up exclusion by making taxable gifts during lifetime). This term from prior law has been redefined to encompass the new estate tax concept of portability (the surviving spouse’s being permitted under certain conditions) to use the remaining basic exclusion amount from his or her previously deceased spouse. (Your Basic Exclusion Amount + Portable Amount from your Last Deceased Spouse = New Applicable Exclusion Amount). So if your spouse died and you did not remarry, in 2011 and 2012 you could bequeath $10 million without tax. The $10 million in assets ($5 million if you cannot use a pre-deceased spouse’s exclusion) avoids estate tax on that amount of assets. The amount of tax avoided is the “Applicable Unified Credit” below.
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