"Federal Gift, Estate and Generation-Skipping Tax Exemptions Remain at $5,000,000 Level – For Now!"

As we reported just over one year ago, legislation enacted at the end of 2010 dramatically increased the exemption amounts for federal gift, estate and GST taxes to $5,000,000 as of January 1, 2011 and decreased the tax rates to 35%.

The 2010 tax law opened the floodgates on January 1, 2011, for wealthy families to gift up to $10,000,000 free of transfer taxes. The exemption for all three taxes estate, gift and GST is subject to further adjustments for inflation. For 2012, an individual's exemption is $5,120,000, and the combined exemption for a married couple is $10,240,000.

But unless there are changes to the tax law in the interim, the floodgates will close at the end of 2012, and on January 1, 2013 the exemptions will drop drastically to $1,000,000 and the transfer tax rates will skyrocket to 55%.

This Stroock Special Bulletin discusses the 2010 tax law and issues that will arise if there are no changes to the tax law prior to January 1, 2013.