For 2011 and 2012, a spouse will inherit their deceased spouse’s unused estate and gift tax exemptions. The previous law stated that the exemption amount in 2011 was to be $1 million with a taxation rate of 55%. This law was changed at the end of 2010 making the federal estate tax exemption $5 million with a taxation rate of 35% over that amount for 2011 and 2012.
Because of changes to the tax law, you may now be able to pass estate tax-free a total of $10 million to your children and other heirs. Technically speaking, a surviving spouse, assuming an election is made by the executor of the deceased spouse’s estate, will be able to increase his or her applicable exclusion amount by the amount of the unused exclusion amount of the deceased spouse (dying after 2010). This new ability to increase the surviving spouse’s applicable exclusion amount by the unused exclusion amount of the deceased spouse has been described by estate planners as the “portability of unused exclusion between spouses.”
For more on this, the American Institute of CPAs has a pretty good article by clicking at this link. For estate tax planning help from a California tax attorney, call Mitchell A. Port at (310) 559-5259.