By: Martin M. Shenkman, CPA, MBA, JD
The federal estate tax laws were amended so the applicable exclusion amount (unified credit), the amount you can transfer free of federal estate tax, was increased to $2 million, $3.5 million in 2009, $5 million in 2010-2012, but it is uncertain if this will be changed by future legislation. Many states had estate taxes that tracked the federal system and realized that they would loose substantial revenues if their state estate tax exclusions increased in line with the federal increases. As a result many states changed their estate tax rules and opted for lower exclusions then the federal amount. This difference between the federal and state estate tax exclusion is referred to as decoupling. The process creates considerable complexity and confusion in planning and the rules from state to state differ considerably, often in more complex ways then just the difference in exclusion amounts. See "decoupled."
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