Credits Against Inheritance Tax

Credits Against Inheritance Tax

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Credits Against Inheritance Tax
Due to inheritance tax law, the federal inheritance tax rate will change in 2011. However, the federal inheritance tax rate will still allow estates to take credits against inheritance or the value of an estate. One such credit is an allowance for benefactors to leave property or money of a certain value, to be passed to heirs tax free. 
The Unified Gift and Estate Tax Rates, allow family members to both gift and bequeath property of a certain value tax free. Inheritance tax law allows parents to leave their children one million dollars tax free beginning in 2011. They are also allowed to gift one million dollars to heirs, tax free in their lifetime. Money inherited in the 2010 tax year is currently tax free, unless next years federal inheritance tax rate is applied retroactive.
There are several credits against inheritance tax which are allowable according to inheritance tax law. In some circumstance, money or property that has already been inherited in the last ten years, and incurred an inheritance tax, can be exempt from further inheritance tax. In other words, the same property inherited more than once in ten years, only incurs the Federal inheritance tax rate the first time that property is inherited.
In 2011 the maximum estate tax credit for heirs is set to be one million dollars with an additional maximum lifetime gift tax credit of one million dollars, unless Congress acts before the sunset clause goes into effect on January 1, 2011. That means that parents may gift one million dollars to a child during their life, tax free, in addition to allowing the child to inherit up to one million dollars tax free. Due to an inheritance credit, that child could then bequeath that money to another individual tax free, if they should pass away in the proceeding ten years.
Inheritance tax law will be changing within the next year. Their is a freeze on the federal inheritance tax rate at zero,for the year 2010. However, once the new tax year begins, federal inheritance tax rates are set to revert back to those that existed in 2001. 
As it stands now, the laws, including credits, are set to revert back to those that existed in 2001 lowering exemption, deductions and credits which increases tax burdens. Those laws actually lower the maximum exemption from 2009 and the amounts that could be bequeathed to heirs tax free. Unless Congress acts soon, many credits will be lowered, thereby increasing the federal inheritance tax rate and greatly altering other inheritance tax laws.

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