Define: Exemption Equivalent

The exemption equivalent refers to the amount of assets or property that an individual can pass on to their heirs without incurring any federal estate tax.

The exemption equivalent is determined by the federal government and is subject to change. As of 2021, the exemption equivalent is $11.7 million per individual.

Yes, the exemption equivalent can be transferred between spouses. This means that if one spouse does not utilize their full exemption equivalent, it can be added to the surviving spouse’s exemption equivalent, allowing for a larger tax-free transfer of assets.

If an individual’s estate exceeds the exemption equivalent, the excess amount will be subject to federal estate tax. The tax rate for estates exceeding the exemption equivalent is currently 40%.

Yes, some states have their own estate tax laws with different exemption equivalents. It is important to consult with a local attorney or tax professional to understand the specific rules and regulations in your state.

Yes, the exemption equivalent can be used for both lifetime gifts and transfers upon death. However, it is important to keep track of the amount used for lifetime gifts, as it will reduce the available exemption equivalent for transfers upon death.

Yes, the exemption equivalent is adjusted for inflation. The federal government periodically reviews and adjusts the exemption equivalent to account for changes in the cost of living.

The exemption equivalent can only be used for federal estate taxes. State estate tax laws vary, and some states may have their own exemption equivalents or tax rates.

Yes, the exemption equivalent can be used for assets held in a trust. However, it is important to structure the trust properly to ensure that the exemption equivalent is utilized effectively.

Yes, the exemption equivalent can be used for assets transferred to non-spouse beneficiaries. However, any amount exceeding the exemption equivalent will be subject to federal estate tax.