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Estate Planning Uncertainties Continue
As of January 1st of this year, there is no estate tax. For those with substantial estates, it’s a once-in-a-lifetime opportunity to avoid estate taxes. Of course, it’s probably not an opportunity that many would want to take advantage of. There’s no estate tax because Congress, with all it’s fighting over healthcare legislation, couldn’t find the time to pass new legislation. Since there is talk of reinstating the estate tax retroactive to January 1st of this year, those trying to settle the estates of their loved ones may be in limbo, if the estate is relatively large.
In 2009, the estate tax law provided for a $3.5 million exemption for each person. Thus, a wealthy couple with properly funded revocable living trusts could shelter $7 million from the estate tax. This was especially important for small business owners and farmers who had the majority of their assets tied up in the family farm or business. Without the exemption, many families could have been faced with selling the family farm or business within six months following the owner’s death, in order to pay the estate taxes.
The previous estate tax law had a sunset provision that called for the estate tax to be eliminated in 2010 and then, in 2011, to revert back to it’s previous level of a one million dollar exemption and a top tax rate of 55%.
According to an article by Mark Schoeff Jr. in the publication InvestmentNews (July 28, 2010), the uncertainty about the estate tax is likely to last at least until the end of September and perhaps until December.
Mr. Schoeff notes in his article that “A proposal by Sens. Blanche Lincoln, D-Ark., and Jon Kyl, R-Ariz., to set the estate tax rate at 35% permanently – and allow a $5 million dollar exemption – probably won’t see action in the Senate before the chamber’s members head home August 6th.”
While many articles and advisors point to an exemption of $3.5 million to $5 million per person, the top rate for the replacement tax seems to still be in question. In the meantime, the longer Congress delays in resolving this issue, the more families are affected and unable to settle the estates of their loved ones. In our opinion, Congress needs to step up to the plate and solve this issue.
In 2009, the estate tax law provided for a $3.5 million exemption for each person. Thus, a wealthy couple with properly funded revocable living trusts could shelter $7 million from the estate tax. This was especially important for small business owners and farmers who had the majority of their assets tied up in the family farm or business. Without the exemption, many families could have been faced with selling the family farm or business within six months following the owner’s death, in order to pay the estate taxes.
The previous estate tax law had a sunset provision that called for the estate tax to be eliminated in 2010 and then, in 2011, to revert back to it’s previous level of a one million dollar exemption and a top tax rate of 55%.
According to an article by Mark Schoeff Jr. in the publication InvestmentNews (July 28, 2010), the uncertainty about the estate tax is likely to last at least until the end of September and perhaps until December.
Mr. Schoeff notes in his article that “A proposal by Sens. Blanche Lincoln, D-Ark., and Jon Kyl, R-Ariz., to set the estate tax rate at 35% permanently – and allow a $5 million dollar exemption – probably won’t see action in the Senate before the chamber’s members head home August 6th.”
While many articles and advisors point to an exemption of $3.5 million to $5 million per person, the top rate for the replacement tax seems to still be in question. In the meantime, the longer Congress delays in resolving this issue, the more families are affected and unable to settle the estates of their loved ones. In our opinion, Congress needs to step up to the plate and solve this issue.
posted by David C. Patterson and Erin Preston at
1:03 PM
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