The federal legislature several years ago passed legislation, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), which repealed the federal estate tax in 2010. While most estate planners expected the legislature to amend the Act before the repeal took effect, and institute an estate tax with an exemption of around $3 to $4 million dollars, this did not happen. The estate tax disappeared for one year in 2010, and then was reinstated for 2011 at a $5 million dollar exemption amount (now up to $5.12 Million for 2012). In addition to the exemption, the law added a “portability” feature to the exemption, which allows a spouse to use any of the unused exemption of a previously deceased spouse. Their are specific limitations on this exemption that must be explored with an estate planning attorney; however, this new law makes it more forgiving on couples who do not set up a proper trusts to limit the impact of estate taxes. Unfortunately, this law is scheduled to expire in 2012. It is expected that Congress will set the estate tax exemption around $3-5 million, and leave the portability feature in the new law. Hopefully, this time Congress will act before the current law expires. If it does not act, the exemption will automatically be reduced back to one million dollars, and the portability feature removed, which would have a significant impact on many estate plans. To deal with the uncertainty in the federal estate tax law, the attorneys at our firm are skilled at drafting estate plans that will allow the most flexibility in planning, including even allowing post-death tax planning using disclaimer trusts. To learn more about these valuable estate planning methods, please contact one of our attorneys today.