The "Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010" (TRA) was signed into law on December 17, 2010. The TRA applies to the years 2011 and 2012.  With so many different types of tax credits available under the new Obama administration, you might be wondering about the Unified Tax Credit. What exactly is a Unified Tax Credit? Who can qualify for it?

Unified Tax Credit is a term often used to refer to the integration of the Gift Tax and the Estate Tax. In other words, both of these taxes - are now integrated into one combined unified tax system. There are different laws and limits that apply separately to each of these taxes, but one Unified Tax Credit guideline to help you and your loved ones save and retain the value of your gifts, properties, personal wealth and investments.

2011 Gift Tax
Starting in 2011, the gift tax exemption amount will increase from $1 million to $5 million. The exemption for couples is $10 million. Gift tax, along with generation-skipping taxes, are again unified with the estate tax. For 2011, the "unified" applicable exemption amount is $5 million per person, and in 2012 this amount is subject to being indexed for inflation." The tax rate is set at 35%. The annual exclusion for tax-free gifts remains $13,000 per donor. A donor may make an unlimited number of $13,000 gifts as long as they are to different individuals.

2011 Estate Tax
Under the TRA, the "applicable credit amount is the amount of tax with respect to an applicable exclusion amount of $5 million." Starting in 2012, the applicable exclusion amount will be indexed for inflation, with adjustments rounded to the nearest $10,000. The maximum rate of estate tax is 35%.

"Portability" of the federal estate tax exemption between married couples. In 2009 and prior years, married couples could pass on two times the federal estate tax exemption by including "AB Trusts" in their estate plan. The new law eliminates the need for AB Trust planning for federal estate taxes by allowing married couples to add any unused portion of the estate tax exemption of the first spouse to die to the surviving spouse's estate tax exemption. This will effectively allow married couples to pass $10 million on to their heirs free from estate taxes with absolutely no planning at all. Note that portability was not applied retroactively to January 1, 2010, and as it now stands is only available for deaths that occur during the 2011 and 2012 tax years.

Proper planning!
Obviously, with all the changes (that are destined to only change in the future), proper planning for your estate is crucial!
Let us guide you through the process so it's not the overwhelming situation it is now! We are only a phone call away!