On January 1, 2014, the federal estate tax exemption (and lifetime gift tax exemption) increased to $5,340,000 per person. This represents a $90,000 increase from $5,250,000 in 2013. Keep in mind the federal estate and gift tax exemption is “unified”. Use of federal gift tax exemption during your lifetime will reduce the amount of federal estate tax exemption remaining at your death. For example, if you give away $2,000,000 in taxable gifts during your lifetime you would likely owe no federal gift tax because you would use a portion of your lifetime federal gift tax exemption ($5,340,000 in 2004) to avoid paying federal gift tax. If you die in December 2014, however, your federal estate tax exemption amount will be reduced by the amount of lifetime federal gift tax exemption you used during your life. In our example, you have already used $2,000,000 of your exemption so you would have $3,340,000 of your federal estate tax exemption remaining to use to pass your estate to your beneficiaries free from federal estate tax.