Dictionary of Exit Planning Terms

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An specified amount of exemption that can be taken to reduce estate and gift taxes. Estate taxes are due for any amount over the sum of the taxable estate and the taxable gifts during lifetime, less the exemption applicable for the year in which the death occurs.  In 2012, this exemption is $5.12 million, with a maximum top rate of 35%. Unless new laws are passed, starting in 2013, this exemptions drops to $1 million, with a maximum top rate of 55%.