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Each person is given a credit that may
be applied to the amount of Federal estate tax owed by that person
at death, which is referred to as the "unified credit" due to its
relation to both the Federal estate tax and the Federal gift tax.
The unified credit is a fixed dollar amount granted to every
person's estate that can be applied to the actual amount of Federal
estate tax that is owed by that estate.
However, rather than discussing the
unified credit, people often discuss the dollar amount of the
taxable estate that the unified credit allows to pass free of the
Federal estate tax. This is known as the "applicable exclusion
amount."
The year of a person's death determines the
Federal estate tax rate, along with the top tax rate and unified
credit amount.
|
Year of Death |
Applicable
Exclusion Amount |
Unified Credit
Amount |
Top Tax Rate |
|
2007 |
$2,000,000 |
$780,800 |
45% |
|
2008 |
$2,000,000 |
$780,800 |
45% |
|
2009 |
$3,500,000 |
$1,455,800 |
45% |
|
2010 |
No estate tax |
|
2011 |
$1,000,000 |
$345,800 |
55% |
|
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As shown by the preceding table, a
unified credit amount of $780,800 is available to those who die
during 2008. The applicable exclusion amount during that same
year is $2,000,000.
In other words, a $2,000,000 taxable
estate will produce $780,800 of Federal estate taxes, which is equal
to the amount of the unified credit granted during 2008. This
is comparable to saying that the $780,800 unified credit excludes
$2,000,000 from the Federal estate tax.
Under EGTRRA (The Economic Growth and Tax Relief Reconciliation Act
of 2001), the applicable exclusion amount varies for different years
as the Federal estate tax is phased out through 2010.
Basically, the dollar value of the
taxable estate that is less than or equal to the applicable
exclusion amount is free of tax and the amount of the taxable estate
that exceeds the applicable exclusion amount is taxed at the top tax
rate.
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Intestacy CalculatorsTM
You can see the dollar value of your intestate
estate that will be given to your surviving spouse by opening the
Intestacy CalculatorTM for your state of permanent
residence and each state where you own any real estate. (If you live
and own real estate in the same state, the same program performs both
calculations.)
You can also open the
Federal Estate Tax Calculator to see the amount of tax due this year.
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