A unified credit is allowed against the federal gift and/or estate tax liability. The amount exempted from tax by the unified credit (the 'applicable exclusion amount' of the credit) is $5 million in 2011 and 2012.  In 2008, when the first $5 million of your taxable estate is exempt from federal estate tax, you are actually receiving a credit which effectively exempts a total of $5 million in cumulative taxable transfers (by gift and at death). Simply put, if you die in 2011 or 2012, the first $5 million in assets you own will not be subject to estate tax. Any amount you own above $5 million subject to federal taxation at a rate of 35%.  (see Gift Tax and Generation Skipping Transfer Tax).

The estate, gift and generation skipping tax for 2011 and 2012 is 35 percent. The estate and generation skipping tax is scheduled to be restored to only $1 million  on January 1, 2013 with a rate of 55 percent.