The federal estate tax exemption has been increased to $1.5 million per decedent, effective in 2004. This exemption is scheduled to rise in steps to $3.5 million in 2009 and there will be no tax on the estates of those dying in 2010. However, the estate tax now is scheduled to reappear in 2011, with an exemption of only $1 million
In reality, now that the exemption has been raised to $1.5 million, it’s unlikely that a future Congress will anger voters by cutting it back to $1 million. Many people would fall into estate tax territory merely by having a house and an IRA.
Therefore, if you expect your estate to be under $1.5 million, you probably won’t need to buy or carry life insurance just for estate tax liquidity. For married couples with estates up to $3 million, straightforward planning can eliminate the threat of estate tax. At the death of the first spouse, money can be left to the next generation, tax-free, with the remainder passing at the survivor’s death.