In Dept. of Treas., “General Explanations of the Administration’s Fiscal Year 2011 Revenue Proposals,” (Feb. 1, 2010), the Administration’s fiscal year 2011 budget includes a presumption that the 2009 estate and GST tax rules are made permanent. This, if enacted, would bring back a $3.5 million applicable exclusion amount and GST exemption, a $1 million gift tax exemption, and a top tax rate of 45%. The Administration also proposes to: (1) authorize regulations under Code Sec. 2704(b) , creating a new category of “disregarded restrictions” that would be ignored in valuing interests in a family limited partnership, corporation or LLC, thereby eliminating or reducing many of the current valuation discounts for such interests; (2) require a minimum term of 10 years for a GRAT and […]

We are busy working on planning solutions to go some way towards assisting our clients address this uncertainty in a helpful way.  In a few weeks we expect to have in place new language in our wills and revocable trusts which will enable any of our married clients who should die this year to continue to meet their family objectives in a tax effective manner. Stay tuned.  We are planning a mailing to all of our clients around the end of this month.  In them meantime, if you are a client or advisor of our clients and you need any additional information or help, please give us a call.

Thanks to the people at Proskauer in New York City for the following analysis: In 2009, the estate and generation-skipping transfer (“GST”) tax exemptions were $3.5 million per person, and the estate and GST tax rates were 45%. In 2001, Congress passed changes to the estate, GST and gift tax rules that take effect in 2010. Those changes call for the estate and GST taxes to be repealed for 2010 and for the gift tax rate to be equal to the highest income tax rate in 2010, which is 35%. Assuming Congress does not change the law, on January 1, 2011, the estate, GST and gift tax laws that existed on January 1, 2001 would be reinstated; that is, the estate and gift tax exemptions […]

The House of Representatives passed on December 3, 2009, H.R. 4154, introduced by Rep. Pomeroy (D-N.D.). This bill, entitled the “Permanent Estate Tax Relief for Families, Farmers and Small Businesses Act of 2009,” would (a) make the estate, gift, and GST taxes permanent; (b) make permanent the 45-percent top estate, gift, and GST tax rate bracket; (c) make permanent the $3.5 million applicable exclusion amount; and (d) repeal the carryover basis rules and preserve the date-of-death value basis rules. (H.R. 4154, 111th Cong., 1st Sess. (2009)) The bill passed the House of Representatives by a vote of 224-199, and it is likely to be modified in the Senate, where several key Senators are known to favor indexing the applicable exclusion amount and possibly other changes […]

The Will Doctor considers this a useful article to limit confusion in a confusing situation, when coupled with other posts. Estate Tax Is Expiring, but Death Won’t Last – NYTimes.com WASHINGTON — A Congressional tax standoff has opened a window of opportunity for wealthy Americans determined to avoid paying up post-mortem. With lawmakers unable to agree on a year-end fix for a quirk in the Bush-era tax cuts, the federal estate tax is set to be repealed for one year as of Jan. 1, meaning that those who suffer a timely death could escape the usual certainty of taxes. “If you are at the checkout counter, you might want to expedite things,” said Representative Richard E. Neal, the Massachusetts Democrat who heads the House subcommittee […]

Another proposal just before year end in the House contained a phased in increase in the exemption equivalent to $5 million, and phased in decrease in the tax rate, down to 35%.  At this point, it starts becoming more difficult to determine whether Congress will be able to overcome its polarization in order to provide some order and stability in the tax regime concerning transfers of wealth. It still seems reasonable to assume the weight of probability lies in favor of the permanent extension of the 2009 regime, or some compromise like the one above-enacted early this year.  But the likelihood of inaction and the resulting tax boondoggle in 2011 is now a real threat.  Scroggins, in his excellent synopsis of the issues which I […]

October, 2009 Technical Newsletter Provided by Leimberg Information Services Author: Jeff Scroggins LISI Estate Planning Newsletter #1505 took a close look at the seemingly never ending saga of the federal estate tax. Now, Jeff Scroggin weighs-in with his thoughts on this exceedingly complex issue. EXECUTIVE SUMMARY: The common consensus since 2001 has been that Congress would eventually adopt permanent transfer tax reforms that provide for estate tax exemptions in the range of $2.0-5.0 million and a flat estate tax between 25% to 45%. Most recent commentators have espoused the view that by 2011 the estate exemption will be $3.5 million and the estate tax rate will be a flat 45%. This article will discuss other possibilities, including the potential return to the 2001 transfer tax […]

The NY Times reports this morning, from a well connected Democratic Senator (Pomeroy), that it appears likely that any extension (either permanent or temporary) of the current tax regime into 2010 will not happen this year, causing the “repeal” of estate tax to occur on Jan 1st in accordance with current law-replaced by an unworkable capital gains tax on inherited property. The Will Doctor was heartened by the Senator’s certainty that next year your Congress will pass the permanent extension of the current estate tax system, retroactive from 1/1/2010. Planning is not as effective with an uncertain (and unworkable) tax environment-the threat of the return to a $1 million exemption is still real, if improbable. The “carryover basis” income tax on inherited property was proven […]

During the week of December 14, the House of Representatives is expected to consider the last appropriations bill for the year, the Department of Defense (DOD) Appropriations bill. As in past years, the House leadership is thinking of using the “last train out of the station” for the year as the vehicle to move “must do legislation.” Speaker of the House Nancy Pelosi (D-CA) said on December 10 that the leadership was considering using the DOD bill to move a jobs bill, extension of unemployment insurance, COBRA premium subsidy extension, and other provisions that expire at the end of the year. It is likely that a short term extension of the estate tax and “so called” extenders will hitch a ride to the House DOD […]

On December 3, the House by a vote of 225 to 200 approved H.R. 4154, the “Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009.” The bill would make permanent the present-law estate, gift, and generation skipping transfer (GST) tax laws in effect for 2009. Under changes made by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the estate tax and the GST tax were scheduled to be repealed for estates of decedents dying in 2010 and a modified carryover basis regime was to apply for 2010. EGTRRA made other changes to the transfer tax rules. All of its changes were scheduled to sunset after 2010. Under the House-passed bill, the unified credit effective exemption amount for estate […]