The Unified Credit is a credit against Federal Estate Taxes. The exemption equivalent is the amount of assets you can own without paying estate tax because of the application of the credit against your tax.
Effective January 1, 2002, the Unified Credit for Federal Estate Tax purposes was increased to the following amounts for the following years:
2002 $1,000,000
2003 $1,000,000
2004 $1,500,000
2005 $1,500,000
2006
$2,000,000
2007
$2,000,000
2008
$2,000,000
2009
$3,500,000
2010
$3,500,000
Please don't get too excited! :)
Remember that when this law was passed there was a huge surplus, a booming stock market and this was prior to September 11, 2002.
To say the least, things have changed since this law was passed. The surplus is gone and not likely to come back any time soon, the stock market is way down and not likely to rebound soon and also the events of September 11th make it clear that large amounts of money will have to be added to our federal budget for homeland security and military expenditures.
This all means that there may be a change to this law in the near future. Under the new law there was a sunset provision which meant that all of the changes in the law, including the increase in the Unified Credit would disappear in 2010. Congress acted in December of 2009 to keep the Unified Credit at $3,500,000 for now, but at any time, Congress could revert back to previous law and lower the Unified Credit, just in case it decided to use the extra revenue to fund say, Social Security, Medicare and Medicaid which are all bankrupt. Congress has shown an inability to stop spending money. Its just easier to print it and borrow it.
The deficit is literally
exploding.
Conservative planners should plan on a $1,000,000
Unified Credit to be safe, because it is highly unlikely that the current law
will stay in place as it exists today. Those who plan on the current law staying
in place with its $3,500,000 Unified Credit, may be in store for a very
rude awakening if and when the law changes and reverts back to the
$1,000,000 Unified Credit or some amount lower than $3,500,000. I don't
have a crystal ball, but I am advising my clients to be conservative and not
count on unified credits above $1,000,000 to be in place at the time of
their death. Better safe than very very sorry.
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