Excerpt from: The New York Times (click for full article)
Then in 2010, contrary to what every accountant and tax lawyer I spoke to at the time believed would happen, the estate tax disappeared. Congress and President Obama could not reach an agreement on the tax. So that year, for the first time since 1916, Americans who died were not subject to a federal estate tax. (Their estates still paid state estate taxes, where they existed, and other taxes, including capital gains, on the value of the assets transferred.)
At the end of 2010, President Obama and House Speaker John A. Boehner reached an agreement that was just as unlikely as the estate tax expiring in the first place: the new exemption was $5 million, indexed to inflation, with a 35 percent tax rate on any amount over that, and it would last for two years. The taxes and exemptions for gifts made during someone’s lifetime to children and grandchildren were also raised to the same level, from $1 million and a 55 percent tax above that.
As I have written many times, this was a far better rate and exemption than anyone expected. It also created a deadline of Dec. 31, 2012, for people who could make a major gift up to the exemption level or above the amount and pay the low gift tax.
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