Federal Estate Tax Under the New Tax Bill

            Under the new tax bill recently passed by Congress, the amount that can be passed estate tax free to heirs (the unified credit or exclusion amount) will rise gradually from $675,000 in 2001 to $3.5 million in 2009. In 2010, there will no estate tax. However, Congress drafted the new law in such a way that all its provisions may expire in 2011, with the possible result that the law at the time of the new bill's passage may be re-instituted. This possibility will make estate planning difficult and somewhat unpredictable.

The following chart illustrates the increases in the exclusion amount and the reduction of the top estate tax rate:

Year              Exclusion            Top Rate

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