Estate Tax

Q. We have about $800,000 in assets. Are we under the limit for sky-high tax rates if something happens to us?

Someone told me $600,000 and another said $1 million.

You are referring to the federal estate tax.

The answer to your question depends upon the year of your death. We are in a transitional period right now.

The old rule was that you may be subject to the federal estate tax if your taxable estate exceeded $600,000. This threshold has been increasing in recent years.

In 2003 it was $1 million. Currently, it is $1.5 million.

It will increase up to $3.5 million in 2009. Under current law, there will be no estate tax in 2010.

But, the old $600,000 limit comes back into play in 2011.

Most practitioners expect additional legislation in this area within the next few years. Also keep in mind that both lifetime gifts and state estate taxes have different thresholds.