By now you probably all have heard about the “deal” reached between the President and Republican Congressional Leaders concerning taxes, including the estate tax. No language on the estate or gift tax actually appeared in the document released by the White House, but it has been widely reported that it includes an estate tax provision for 2011 and 2012 that has a top rate of 35% and an exemption of $5 million per individual. This agreement appears to draw on the Lincoln-Kyl estate tax proposal introduced earlier in the Senate, which also proposed to top 35% rate and $5 million exemption, but further details are unavailable. It is also unclear how or if the estates of those who died in 2010 would be affected by this agreement.
So, if this tentative agreement passes both Houses of Congress before the end of this year, the estate tax will return in 2011 with a $5 million personal exemption and a tax rate of 35%. Many congressional Democrats oppose the proposal, so passage remains uncertain. If the agreement does not pass prior to December 31, 2010, then the estate tax will return with a $1 million personal exemption and a 55% tax rate.
If the Bill passes, many of you undoubtedly will breathe a sigh of relief and feel that there is less urgency to either prepare or update your estate plan. However, this deal will affect only people dying in the calendar years 2011 and 2012. The next Congress then will have to strike another deal or the estate tax likely will default back to the $1 million exemption and 55% tax rate on January 1, 2013. As this newsletter is written, much uncertainty remains over the passage of this Bill. Stay tuned.
How can this chaos be managed? We have a process in place that relieves our clients of worry about any curve ball Congress may throw at us. Our annual maintenance program is a key part of this process. We keep our clients informed and keep their estate plans updated to stay in tune with whatever legislation comes our way. In an unending period of uncertainty, this planning process provides true peace of mind.