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Tax Tip of the Week
For the week of
February 25, 2002

Pass more to your heirs tax-free

The Tax Relief Act of 2001 provides new tax rules for transferring assets by lifetime gifts or through transfers at one's death.

Make larger tax-free gifts. The new law allows you to give away one million dollars during your lifetime, free of gift tax, starting in 2002. This is in addition to the annual gift exclusion of $11,000 per donee. It's also beyond the unlimited amount you can give to a school or medical provider on behalf of another person.

Gift tax rates will gradually be reduced over the coming years. After 2009, the top rate on gifts drops to 35 percent.

Update your estate plan. This year the top estate tax rate drops to 50%. It continues to decline by 1% each year until it reaches 45% in 2007. The estate tax is scheduled to be completely repealed in 2010.

The nontaxable estate amount increases from $675,000 to $1 million this year. The exemption amount increases over the years until it reaches $3.5 million in 2009. The estate tax is scheduled for repeal in 2010.

Watch for new developments. Keep in mind that the estate tax repeal is not permanent. Under current law, the estate tax returns in 2011 to the old pre-2001 Tax Act rates and limits. And Congress may change the rules between now and then. That makes long-term planning even more important and challenging.

Call us to discuss the current rules and how they affect your gift and estate planning. We are here to see that you pay no more tax than the law requires.


Prior Tax TipsClick here to view previous tax tips.

"Tax Tips" are published weekly to provide useful tax information. Return to this site every week for helpful tax-cutting suggestions, tax reminders, and current tax information.

The information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.

If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax-cutting information from time to time, please contact our office. We're here to help.

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