Increased Estate Tax Applicable Exclusion Amount
The applicable exclusion amount is the amount on which
the unified credit (applicable credit amount) is based. An
estate tax return for a U.S. citizen or resident needs to be
filed only if the gross estate exceeds this amount.
Exclusion Year Amount
2002 and 2003 ...................... $1,000,000
2004 and 2005 ....................... 1,500,000
2006, 2007, and 2008 ................ 2,000,000
2009 ................................ 3,500,000
Increased Gift Tax Applicable Exclusion Amount
Beginning with gifts made in 2002, the applicable exclusion
amount for lifetime gifts will be fixed at $1 million.
Increased Annual Exclusion for Gifts
The annual exclusion for gifts of present interests made to
a donee during the calendar year is increased to $11,000.
The annual exclusion for gifts made to spouses who are
not U.S. citizens is increased to $110,000.
Reduction of Maximum Estate and Gift Tax Rate
For estates of decedents dying, and gifts made, after 2001,
the maximum rate for the estate tax and the gift tax will be
reduced as follows.
Maximum Year Tax Rate
2002 .................................. 50%
2003 .................................. 49%
2004 .................................. 48%
2005 .................................. 47%
2006 .................................. 46%
2007, 2008, and 2009 .................. 45%
Repeal of Phaseout of Graduated Rates
For estates of decedents dying, and gifts made, after 2001,
the benefit of the graduated rates will no longer be phased
out for estates and gifts in excess of $10 million.
Reduction of Credit for State Death Taxes
For estates of decedents dying in 2002, the credit allowed
for state death taxes will be limited to 75% of the amount
that would otherwise have been allowed. For estates of
decedents dying in 2003 and 2004, the credit will be limited
to 50% and 25% respectively.
For estates of decedents dying after 2004, the state
death tax credit will be replaced with a deduction for state
death taxes.
Changes to Installment Payment Provisions
For estates of decedents dying after 2001, several rules
applicable to qualifying for installment payments of estate
tax have been changed.
- The allowable number of partners and shareholders in a closely held business is increased from 15 to 45.
- Stock in qualifying lending and finance businesses is treated as stock in an active trade or business company.
- The rules regarding non-readily-tradable stock and holding company stock are clarified.
Increase in Generation Skipping Transfer (GST) Exemption
The generation-skipping transfer (GST) lifetime exemption
increased by $40,000 to $1,100,000. The annual increase
can only be allocated to transfers made during or after the
year of the increase.
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