As I have previously discussed, Congress has made the lifetime gift and estate tax exemption or unified credit permanent at its current level of $5 million, adjusted for inflation. With Congressional actions, the face of estate planning has undergone a great shift. In the early 2000s, when the unified credit was only $675,000, estate tax planning was an essential part of estate planning if the client owned any property thas was likely to be worth more than the exemption limitation. In 2001, Congress passed the Economic Growth and Tax Relief Reconciliation Act of 2001, which increased the exemption amount in phases until its 2010 when there was no exemption. At that time, Congress again choose to help taxpayers by creating the $5 million exemption. The bill was set to sunset at the end of 2012, but Congress choose to act once again, making the $5 million exemption permanent.
Congressional action has caused a huge shift in how estate planning attorneys offer advice to clients. With such a high unified credit, there is no longer any tax motivation to make gifts because they will no longer fear having their assets drained by the federal estate tax.
See Julie Jason: Estate Planners Need to Digest New Tax Structure, Stamford Advocate, Jan. 11, 2013.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.
