The Unified Credit against the Estate Tax for a descendant dying in 2012, has been increased from $5,000,000 to $5,120,000. This is an inflation adjustment. The annual exclusion for gifts remains at $13,000 to any person.

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Unless Congress takes action before December 31, 2012, the Unified Credit now at $5,120,000 will expire and as of January 1, 2013 will be at $1,000,000.

At this time, there is a great deal of speculation as to what actions Congress may take, if any.

Should the credit be allowed to remain at $1,000,000, there will be a far greater need for persons to examine their estate plans and make appropriate adjustments. There may well be an increased need to establish material deduction trusts (also known as Shelter Trusts) in order for married couple to be able to fully utilize the Unified Credit.

Speaking of “inflation” the Social Security Tax Wage Base has increased in 2012 from $106,800 to $110,100.

If you have questions or concerns about how the 2012 Changes to the Federal Estate and Gift Tax may effect you, please call (303) 972-4448 or contact our office for an appointment.