In 2001, every American received a "credit" against federal Estate and Gift Taxes
of $220,550 which was equivalent to transferring $675,000 tax free to your heirs. And, if you were married, and your spouse (if an American) also used the $675,000, you may, as a couple, give $1.35 million to your heirs free of Estate Tax
. Beginning in 2002, the amount you can pass tax free to your heirs increases from $675,000 in 2001 to $1.5 million in 2004 and then gradually to $3.5 million in 2009. In 2010, the estate tax (but not the gift tax) expires; in 2011, the estate tax again becomes effective at the 2002 exemption level for deaths occurring in 2011 and thereafter.
This credit is referred to as the "unified" credit because federal gift and Estate Taxation
are integrated into one unified tax system. There is no Estate or Gift Tax on the first $675,000 (or the current "unified" credit level) in 2001 of your combined taxable gifts
and transfers at death. You ante up when the sum reaches over $675,000 (or the current "unified" credit amount).
for direct information on how to fill out the form
for the form itself.