Increased Exemption Amounts Create New Opportunities

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (2010 Act) created a major change that came as a surprise to many observers.

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (2010 Act) created a major change that came as a surprise to many observers: the “reunification” of the federal gift and estate tax systems. Since 2002, the gift and estate tax exemption amounts had been “decoupled.” This meant, for example, that in 2009, the $1 million an individual could give to others free of tax during his lifetime was significantly less than the $3.5 million that could be transferred tax-free at death. The 2010 Act brought the two systems back into alignment. It's now possible to give up to $5 million tax-free to others during lifetime or at death. If a decedent has used the $5 million exemption during his lifetime, no additional exemption is available at death. Under new portability provisions, however, a spouse may be entitled to use any of a predeceased spouse's unused exemption without the use of trusts or other special planning.


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TAGS: Philanthropy
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