LATEST UPDATE ON THE STATUS OF THE ESTATE TAX
The future of the estate tax remains a back-burner item in Congress. With so many legislative priorities ahead of it and as more and more members of Congress become preoccupied with mid-term elections, the likelihood of legislation being enacted before the end of the year grows more remote. There has been some talk of passing a bill that would permit 2010 estates to choose to follow either the 2009 law (3.5 million dollar exemption, step up in basis and a 45% tax rate) or the 2010 law (no estate tax, but carryover basis ). But it remains just talk.
Meanwhile, 2011 is fast approaching—with a return to an estate tax with a 55% rate and only a $1 million personal exemption. If this concerns you, remember that the democrats favor, and the house already has passed, a bill which extends the 2009 law into the future. The republicans want a $5 million exemption and a 35% rate. The problem with that position is that under the “pay-as-you-go” requirements, the estimated $91 BILLION cost of this change must be offset by increasing taxes elsewhere. There is no cost to extending the previous law. This proposed $91 billion reduction in the estate tax will benefit only the wealthiest ¼ of 1% of all households. Under the prior law, 99.75% of all households paid no estate tax. This should make voting to extend the prior law a ”no-brainer”, but instead it appears that the republicans have “no brains” on this issue.
Many of you will be subject to the increased estate tax next year. If you aren’t successful in lobbying your Senators to extend the 2009 law, you must seriously consider beginning the estate planning that you’ve been putting off until “absolutely necessary”. 2011 is that time.
On a lighter note, while Congress dithers, I’m taking a week off to see my son get married. I should be back in the office on June 2.
