As the 2010 legislative session closed, Congress pushed through a series of provisions pertaining to estate and gift taxes. For the most part, these last-minute changes mean favorable treatment for taxpayers. However, as this tax holiday is set to last for a very limited time period, taking advantage of the possible savings as soon as possible is imperative.

Bigger Exemptions, Lower Rates

The estate tax and gift tax now have a top rate of 35 percent (in years past, 55 percent was the top rate). In 2010, the gift tax exemption was just $1 million, and it was not portable among married couples. Today, a generous $5 million lifetime exemption is the rule of the day for the estate tax, gift tax, and generation-skipping tax.

Another significant tax tool currently in play is the portability of exemptions between spouses. If one spouse dies, any remaining portion of his or her $5 million individual exemption can be shifted to the surviving spouse. This means that a widow or widower could potentially have a $10 million gift tax exemption.

Of course, none of us have control over the timing of our death, so it is difficult to capitalize on lower estate tax rates. But, taking advantage of a variety of current favorable tax rules can mean big estate savings down the road. For instance, some individuals are giving away as much as possible to their heirs now under the lower gift tax rates, hoping to avoid the possibility of oppressive estate taxes in the future.

A Limited Window

Unfortunately, the taxpayer-friendly rules currently in effect are set to expire at the end of 2012. If Congress does nothing in 2013, individual exemptions will revert to the $1 million limit, and the 55 percent top rate will return.

Seek Help

No one knows for sure what lawmakers will do with the tax code before the current rules sunset, so now is the time to contact an estate planning attorney to discuss the best way to take advantage of the current generous tax rules.