ABA Family Legal Guide

Estate Planning

Death and Taxes

I'm not rich. Do I have to worry about federal estate taxes?

Your estate isn't liable for federal estate taxation unless it exceeds the available exemption amount. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) provides for a gradual increase in the exemption. It is now $2 million and will rise to $3.5 million in 2009.

In addition, you can pass your entire estate, without any estate taxes, to your spouse. (This is called the unlimited marital deduction.) If you simply leave your estate to your spouse and don't create an appropriate trust to take advantage of your above stated exemption, your spouse's estate will pay taxes on any amount over the exemption amount when he or she dies (unless he or she leaves it to a new spouse).

If your estate is likely to exceed the current threshold, however, good estate planning can sharply reduce the amount.