February 2008 News Update

Tax Law Changes for Gifts, Estates, and Trusts

Gifts

Annual Exclusion for Gifts for 2007

For calendar year 2007, the first $12,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts made during that year.

For calendar year 2007, the first $125,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts made during that year.

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Estates and Trusts

Reduction of Maximum Estate and Gift Tax Rate

For estates of decedents dying, and gifts made, after 2006, the maximum rate for the estate tax and the gift tax for 2007, 2008, and 2009 is 45%.

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2007 Federal Tax Rates for Estates and Trusts

The 2007 federal estate and trust tax rates are as follows.

2007 Federal Estate and Trust Tax Rates
If taxable income is:	The tax is:
Not over $2,150	15% of the taxable income
Over $2,150 but not over $5,000	$322.50 plus 25% of the excess over $2,150
Over $5,000 but not over $7,650	$1,035.00 plus 28% of the excess over $5,000
Over $7,650 but not over $10,450	$1,777.00 plus 33% of the excess over $7,650
Over $10,450	$2,701.00 plus 35% of the excess over $10,450

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Increased Estate Tax Applicable Exclusion Amount

An estate tax return for a U.S. citizen or resident needs to be filed only if the gross estate exceeds the applicable exclusion amount, listed below.

Applicable Exclusion Amounts
Year	Exclusion Amount
2007 and 2008	$2,000,000
2009	$3,500,000

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Limit on Contributions to Funeral Trusts

For a contract entered into during calendar year 2007 for a qualified funeral trust, as defined in section 685 of the Internal Revenue Code, the trust may not accept aggregate contributions by or for the benefit of an individual in excess of $8,800.

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Valuation of Qualified Real Property in Decedent's Gross Estate

For the estate of a decedent dying in calendar year 2007, if the executor elects to use the special use valuation method under Section 2032A of the Internal Revenue Code for qualified real property, the aggregate decrease in the value of qualified real property resulting from electing to use this election that is taken into account for purposes of the estate tax may not exceed $940,000.