The 2001 Tax Act made significant changes in the maximum estate that a person can pass to her or his heirs without having to pay Federal Estate Tax.  This was changed again in 2010.  The maximum amount depends upon a number of factors. Two of the most significant factors continue to be (1) the amount of taxable gifts the person made during her or his lifetime and (2) the year in which she or he dies. If a person made no taxable gifts during her or his lifetime, then the maximum tax-free estate (Federal Estate Taxes) would be the amount indicated in the Table below for a person who dies during the indicated year. The 2001 and 2010 laws also changed the maximum rate of Federal Estate Tax. The maximum rate (also called the marginal rate) for each year is also indicated in the Table.  [See Note Below]




Year         Maximum Tax-Free Estate         Maximum Tax Rate


2001             $ 675,000                                       55%

2002              $1,000,000                                    50%

2003             $1,000,000                                     49%

2004             $1,500,000                                     48%

2005             $1,500,000                                     47%

2006             $2,000,000                                     46%

2007             $2,000,000                                     45%

2008             $2,000,000                                     45%

2009             $3,500,000                                     45%

2010             No Limit                                         No Tax

2011             $5,000,000                                     35% 

2012             $5,000,000                                     35%

2013             $1,000,000                                     55%


If an estate is larger than the threshold amount indicated above, then the estate will be subject to Federal Estate Tax. Under certain circumstances, a smaller estate may also be subject to that tax. The Tax Rates range from 35% to 55%, depending on the year of death and the size of the estate. For persons who die in year 2011 with an estate over the current threshold ($5,000,000), the Tax Rate is 35%.   The threshold is currently scheduled to decrease significantly in year 2013 and the marginal rate is scheduled to return to 55% in that year.  During years 2011 and 2012, the picture is further complicated by "portability" - the ability of a surviving spouse to take advantage of her or his spouses unused credit amount.


Note - Warning: This Table and its contents are for informational purposes only and do not constitute legal advice. The particular circumstances may affect a person's tax obligations. You should consult an attorney in the state where you reside to determine if the Federal Estate Tax applies and whether the normal tax thresholds apply to your particular situation before acting on any information contained in this Table.


Notice Pursuant to Final Regulations Under Circular 230, effective June 20, 2005

The opinions contained in any communication on the web site are not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code.

Copyright 2011 Marc H. Jaffe and Fromhold Jaffe & Adams

See other articles at this web site about estate and inheritance taxes and estate planning.