1. This annual exclusion amount is being indexed for inflation. The exclusion amount for 2006 is $12,000.

2. These payments must be made directly to the service provider and can not first be made to the intended beneficiary.

3. The estate and gift taxes, which were part of a "unified" system prior to the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA" or the "2001 tax act"), have now been separated.Ê The gift tax lifetime exemption will remain at $1,000,000, while the estate tax lifetime exemptionÊ (which is known as the "Applicable Exclusion Amount") is scheduled to gradually increase to $3,500,000 by 2009 and the estate tax is scheduled for repeal as of January 1, 2010.Ê However, unless the provisions of the 2001 tax act which relate to the gift and estate taxes are extended or made permanent, the estate tax will return as of January 1, 2011, with a $1,000,000 exemption amount, and the gift and estate taxes will once again be part of the unified system which existed prior to the pre-2001 tax act.

4. Prior to the 2001 tax act, the top rate was 55%, and there was also a 5% surcharge tax which applied to total taxable gifts in excess of $10,000,000 (providing an effective top marginal rate of 60%).Ê Under the 2001 tax act, the 5% surcharge was repealed, and the top rate is scheduled to decrease slowly from 55% to 45%, with the rate dropping to 50% as of January 1, 2002, to 49% as of January 1, 2003, to 48% as of January 1, 2004, to 47% as of January 1, 2005, to 46% as of January 1, 2006, and to 45% as of January 1, 2007.Ê After the estate and GST taxes are repealed on January 1, 2010, the gift tax will become a flat 35% tax.Ê However, unless the 2001 tax act is extended or otherwise made permanent, the rate structure which existed prior to the 2001 tax act (including the 5% surcharge) will come back into effect as of January 1, 2011.

5. Thus, a husband and wife together can have the first $4,000,000 of assets pass estate tax-free provided (1) both husband and wife each own their assets properly, and (2) both husband and wife have a Will structured to take full advantage of their respective applicable exclusion amount.Ê Under the Taxpayer Relief Act of 1997, the Applicable Exclusion Amount was scheduled to increase from $675,000 (the 2001 amount) per person to $1,000,000 per person by 2006.Ê Under the 2001 tax act, however, the Applicable Exclusion Amount is instead scheduled to increase from $675,000 (the 2001 amount) to $3,500,000 by the year 2009, with the increases beginning in 2002.Ê In addition, the estate tax is scheduled to be fully repealed in 2010, for decedents dying after December 31, 2010.Ê Under the 2001 tax act, the Applicable Exclusion Amount increased to $1,000,000 as of January 1, 2002.Ê As of January 1, 2004, the Applicable Exclusion Amount increased to $1,500,000.Ê As of January 1, 2006, the Applicable Exclusion Amount increased to $2,000,000.Ê As of January 1, 2009, the Applicable Exclusion Amount increases to $3,500,000.Ê As of January 1, 2010, the estate tax ceases to exist.Ê However, under the current law, the estate tax reduction and repeal will have to be extended or otherwise preserved by a future tax act, or the tax rules will revert to the rules which were in place prior to the 2001 tax act as if the 2001 tax act had never existed.Ê As a result, the estate tax law, as it existed prior to the 2001 tax act, including the increase in the Applicable Exclusion Amount to $1,000,000 under the 1997 Act, will come back into existence as of January 1, 2011.

6. Prior to the 2001 tax act, the top rate for estate taxes was 55%, and there was also a 5% surcharge tax which applied to total estates or generation-skipping transfers in excess of $10,000,000 (providing an effective top marginal rate of 60%).Ê Under the 2001 tax act, the 5% surcharge was repealed, and the top rate is scheduled to decrease slowly from 55% to 45%, with the rate dropping to 50% as of January 1, 2002, to 49% as of January 1, 2003, to 48% as of January 1, 2004, to 47% as of January 1, 2005, to 46% as of January 1, 2006, and to 45% as of January 1, 2007.Ê The estate and GST taxes are repealed on January 1, 2010.Ê However, unless the 2001 tax act is extended or otherwise made permanent, the estate and GST taxes, along with the rate structure which existed prior to the 2001 tax act (including the 5% surcharge) will come back into effect as of January 1, 2011.

7. Beginning in 1999, this GST tax exemption was being indexed (i.e. increased) for inflation, and indexing continued through the end of 2003.Ê Beginning in 2004, this exemption is no longer being indexed for inflation; however, the GST tax exemption amount will be made to match the estate tax Applicable Exclusion Amount, and the GST tax exemption amount will therefore increase along with the Applicable Exclusion Amount through 2009.Ê As of January 1, 2010, the GST tax, along with the estate tax, will be repealed.Ê However, unless the repeal is extended or otherwise made permanent, the GST tax, along with the estate tax, will come back into effect as of January 1, 2011, and these taxes will again be governed by the laws as they existed prior to the 2001 tax act, which means that the GST exemption will be 1,000,000, and indexed for inflation.

8. This annual exclusion from the GST tax only applies to "direct skips" (i.e. transfers made directly to the beneficiary) or to certain limited types of trusts.

9. The GST tax is a flat tax imposed at the top marginal rate for estate taxes for a given year.Ê Prior to the 2001 tax act, this rate was 55%.Ê Under the 2001 tax act, the top estate tax rate is scheduled to slowly decrease from 55% to 45% over the years from 2001 through 2007, and the estate and GST taxes are repealed as of January 1, 2010. However, unless the 2001 tax act is extended or otherwise made permanent, the estate and GST taxes, along with the pre-2001 tax act rates, will come back into effect as of January 1, 2011.