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Probate and Property

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Under the Internal Revenue Code of 1986, taxpayers are permitted a federal gift tax exemption and an estate tax exemption. Although technically not exemptions but more in the nature of exemption "equivalents" that entitle taxpayers to a credit, each is more easily understood as an exemption. The gift tax exemption, as so understood, is $1 million for each taxpayer and is not scheduled to increase. The estate tax exemption, as also so understood, is $1 million for 2005 and is scheduled to become $2 million in 2006, 2007, and 2008 and reach $3.5 million in 2009. There will be no estate tax for individuals dying in 2010. Beginning in 2011, the estate tax exemption drops to the gift tax exemption level of $1 million.