Without swift action by U.S. Congress, on January 1, 2013, the federal estate tax exemption would have reverted to $1 million with a 55% top rate. However, effective immediately every person may leave or give away up to $5.12 million without owing any estate tax. The tax on estates subject to the tax the gift/estate rate is now 40%.

As a practical matter, this means that under the new law about 97% of all estates in the United States will not owe any federal gift/estate tax! The exemption amount will continue to be indexed for inflation each year. Additionally, unlike legislation enacted in the past decade, there is no sunset provision for these amounts. The exemption amount is indexed for inflation and will remain in effect until Congress changes it again.