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Indianapolis Indiana Lawyers
Wills, Trusts, Estates and Complex
Litigation, Living Trust, Living Will, Probate, Corporate & Securities Law, International Business Law
Immigration, Real Estate, Estate Planning & Administration
Changes to Federal Estate Tax Laws
2001 Tax Relief Act
President Bush signed
into law the Economic Growth and Tax Relief Reconciliation Act of
2001[see schedule].
The changes are complex, but in the estate tax area, they basically
provide the following:
1. The federal estate tax
exemption increased to $1 million in 2002 and will continue to
gradually increase to $3.5 million in 2009. Then in 2010, the
federal estate tax ends. This is all good news, but do not throw
away your estate plans because in 2011 the federal estate tax is
resurrected to today's rates.
2. The top federal estate
tax rate (currently 55%) will decrease in 2002 to 50% and will
continue to decrease to 45% in 2009. It also will be revived after
the year 2010 to the current rate.
3. Also in 2010, a
"carryover basis" rule will apply, which will tax heirs on the
capital gains they inherit. Currently, heirs receive a step-up in
basis to an asset's date of death fair market value; however, in
2010, heirs will "carryover" the decedent's basis and inherit a
sizeable income tax at the sale of the asset.
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Schedule: Tax Relief Reconciliation
Act of 2001 |
|
Calendar Year |
Gift Tax- Exemption Amount |
Estate Tax- Exclusion Amount |
Maximum Estate Tax Rate |
Amount of Child Tax Credit |
Annual IRA Contribution Limit |
|
2002 |
$1 million |
$1 million |
50% |
$600 |
$3,500 |
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2003 |
$1 million |
$1 million |
49% |
$600 |
$3,500 |
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|
|
|
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2004 |
$1 million |
$1.5 million |
48% |
$600 |
$3,500 |
|
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2005 |
$1 million |
$1.5 million |
47% |
$700 |
$4,500 |
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2006 |
$1 million |
$2 million |
46% |
$700 |
$5,000 |
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2007 |
$1 million |
$2 million |
45% |
$700 |
$5,000 |
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2008 |
$1 million |
$2 million |
45% |
$700 |
$6,000 |
|
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|
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2009 |
$1 million |
$3.5 million |
45% |
$800 |
$6,000 |
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2010 |
$1 million |
N/A - repealed |
N/A - repealed |
$1,000 |
$6,000 |
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2011 |
$1 million |
$1 million |
55% |
$1,000 |
$6,000 |
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