Saturday, September 17, 2011

Estate and Gift Tax Exclusion Amounts should rise in 2012

The Federal Estate Tax exemption amount should rise to $5.120 million in 2012 according to projections published by CCH Tax and Accounting.  As a result of the unification of the estate and gift tax exemption amounts under the Tax Relief Act of 2010, an individual's lifetime gift tax exclusion should also increase to $5.120 million for 2012.  (Unless there is Congressional action, gift and estate tax levels are set to revert to much lower 2001 amounts in 2013.)

In addition, donors may continue to use their annual gift tax exclusion before having to use any part of their lifetime gift exclusion amount. The annual exclusion amount which was set at $13,000 per recipient in 2011 is expected to remain at that figure next year.  (Using the annual exclusion, $26,000 per recipient can be gifted by married couples who "split" the gift.)

The increase in the estate and gift tax exemption amounts will improve an already fertile opportunity for families to achieve estate tax savings, but perhaps only for one year.  See "Passing on Wealth to your Children: Should you Wait until you die.

CCH also projects that there will be a slight increase in income tax brackets for estates and non-grantor trusts: up $100 from $2,300 in 2011 to $2,400 in 2012 for the 15-percent bracket; up $150 from 2011 for the 25-percent bracket, to $5,600; up $200 from 2011 for the 28-percent bracket, to $8,500; up $300 from 2011 for the 33-percent bracket, to $11,650.

The per diem exclusion for long-term care insurance proceeds for 2012 are projected to be $310 per day. The dollar level of long-care premiums deductible as health insurance premiums will range from $350 for those 40 years or younger to $4,370 for those over 70 years of age.

CCH's projections are based on the inflation-adjustment provisions of the Internal Revenue Code (IRC) he average of the Consumer Price Index for All Urban Consumers (CPI-U) published by the Department of Labor for each month in the 12-month period ending on August 31, 2011. Official IRS figures will not be released until later this year.

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