The 2001 Tax Cut

Estate Tax Repeal

The new law reduces the estate tax beginning in 2002. In 2010 the estate tax is repealed, but with gift tax remaining in place, and a modified carryover basis provision. Unless some later Act of Congress puts a wooden stake through its heart, the estate tax will return from the grave in 2011.
    Only a tiny percentage of all estates pay estate tax, even under current law. That percentage will go down as the "unified credit" increases. At the same time, tax rates will decrease for those estates still large enough to pay the tax. The amount shielded from estate tax, and the top rate of estate tax, will be as follows:

These amounts don't represent the maximum amount that can be shielded. With proper planning, most people can shield far more than double the amount represented by the exempt amount column. As a practical matter, once the exclusion amount reaches $3.5 million in 2009, the only people who will benefit from total repeal of the estate tax in 2010 are the super wealthy � a tiny fraction of 1% of all estates. It seems likely this consideration will come into play when Congress decides whether to make the 2010 repeal of the estate tax permanent.
    The new law makes various other changes in estate and gift tax provisions, including elimination (in 2002) of the 5% surcharge that eliminates the benefit of lower estate tax brackets for larger estates.

by Kaye Thomas    
May 27, 2001    

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