Most people are aware of the fact that estates that exceed the federal estate tax threshold are subject to federal estate tax. For many years, this threshold, which we call the federal exclusion amount, remained at $600,000. However, the Tax Relief Act of 2001 provided for substantial increases to the federal exclusion amount, beginning in 2002 and ending in the year 2010, when the tax will be at least temporarily eliminated.  For the calendar year of 2006, the federal exclusion amount is $2,000,000. If you have an estate that exceeds this amount, chances are you have already done some planning in order to minimize or even eliminate the federal estate tax. You may already have a living trust in place to hold the federal exclusion amount and take advantage of the unlimited marital deduction from the federal estate tax. Once you have your basic estate plan in place, you should think about additional ways to shelter your assets if they exceed $2,000,000 (or, for married couples, $4 million). The following exclusion amounts will apply in the following years:

While the current plan is for the elimination of the Federal Estate Tax in 2010, the current provision "sunsets" the phase in.  If Congress does not act at all, the tax exclusion reverts to the 2002 level of $1,000,000 for deaths occurring in 2011 and thereafter.

For a further discussion of additional tools that you might consider implementing if your estate exceeds the federal exclusion amount see the following articles:

• The Tax Relief Act of 2001
• Annual Gifts
• Estate Planning with LLCs
• Charitable Remainder Trusts
• Irrevocable Life Insurance Trusts

This summary is intended as a source of general information.  If you have questions or desire additional information, please contact Ryan M. Wilson at (517) 377-0897or rwilson@fraserlawfirm.com.