The Federal Estate Tax

The Federal Estate Tax has become a bit of a headache for us estate planning attorneys. Every year the exemption has changed, and last year the estate tax was entirely repealed. As part of the legislation that Obama passed at the end of 2010, the estate tax was reinstated, and will exist in its current form for the next two years.

That said, very few people will be subjected to it. Individuals can pass up to $5,000,000 free of estate tax, and married couples can now use their spouses unused exemption. So the second spouse to die can pass up to $10,000,000 free of the estate tax, assuming that the first spouse did not use any of the exemption.

The tax rate itself was also lowered. The maximum rate on estate tax, gift tax, and generation-skipping tax is now 35%. The lifetime gift tax exemption is also now at $5,000,000, although the yearly exclusion remains at $13,000.

So while there is currently a federal estate tax, the amount of estates that it will actually impact is very low.

While the Federal Estate Tax has become a rare concern, at least for the next couple of years, Minnesota has it's own estate tax. Any estate over $1,000,000 will likely end up owing some money to the State of Minnesota.


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