S. 722, 111th Cong., 1st Sess. (March 26, 2009), introduced by Senate Finance Committee Chairman Max Baucus (D-Mont.), contains an extensive section on estate tax reform. The bill initially makes permanent many of the provisions of the tax law, including the 10- 25- and 28-percent individual income tax rates, the 15-percent top tax rate and the 5-percent rate for middle- and low-income taxpayers on long-term capital gains and dividends, and indexes several key exemption levels (such as the alternative minimum tax exemption). Title III of the bill would also:
* make the estate, gift, and GST taxes permanent;
* reunify the gift tax and estate tax, creating a $3.5 million gift tax exemption;
* make permanent the 45-percent top estate, gift, and GST tax rate bracket;
* make permanent the $3.5 million applicable exclusion amount;
* index the applicable exclusion amount, gift tax exemption and GST exemption for inflation after 2010;
* increase and index certain exemptions for family farms and businesses to the $3.5mm level; and
* make the unused applicable exclusion amount of the first spouse to die available to the surviving spouse (known as “portability”).
The Will Doctor notes the following:
1) this proposal conforms to what the administration has been pointing towards, and what the professional consensus has suggested, but:
2) this omits, at present, other tweaks to the estate and gift tax techniques such as valuation discounts, GRAT remainder provisions, and alteration of annual exclusion rules-good news for those still in the estate tax danger zone after application of a $3.5mm exemption per spouse.