Thursday, August 18, 2011

The $5 Million Exemption

On December 17, 2010, President Obama signed a bill raising the exemption from federal gift tax to $5 million.  As a married couple, each is entitled to such an exemption, bringing the total assets that a couple is able to transfer as a gift, tax-free, to up to $10 million.  Gifts beyond such exemption are subject to a federal tax up to 35%.  This new law is in effect for the year 2011 and 2012 and is set to expire at the end of 2012.  If Congress takes no action to extend or change the laws, the lifetime gift tax exemption will revert to $1 million and the top tax rate will go up to 55% beginning 2013.  The new bill unifies both the exemption from gift tax and estate tax for asset transfers to $5 million, once again befitting of the term "unified credit".