Most of us are aware by now that there is no federal estate tax in 2010.   George Steinbrenner's heirs are delighted, I'm sure, because his vast estate will now pass to them free of any estate taxes.  Although I don't know the value of his estate, I do know that the estate tax in 2009 was 45%.  You can do the math on the amount of estate taxes that George avoided by dying in 2010.

Unfortunately, most of us won't have heirs that fair as well as George Steinbrenner's - for obvious reasons, of course, but also because the federal estate tax will probably come back with a vengeance in 2011.  For many of us, the amount exempt from the estate tax will probably be high enough so that it won't even be an issue.  If nothing is done by 2011, the exemption will be $1 million.  If Congress gets its act together, it will probably be raised to around $3.5 million - at least that's the current thinking.

Still, the whole idea of estate tax planning should not be overlooked.   Unfortunately, however, our parents may not be too keen on addressing that topic, and getting them to actually do something about it may not be an easy task.

 Sometimes, a little psychology and a little finesse is the best medicine.  You can't, after all, just tell them that estate planning is necessary - they just won't buy it.  You have to kind of dance around the topic in ways that makes sense to them. 

If you're in this situation (i.e., you want to have your parents take care of their affairs - including estate tax planning) and don't feel comfortable discussing it with them, then you should take a look at a recent article published by U.S. News and World Report entitled, "How to Talk to Your Parents About the Estate Tax."  It might give you the right approach for your particular situation.

Comment (0) Read More...

If you're looking for some pearls of wisdom regarding the future of the federal estate tax, don't look here.  All we can do is report on the latest musings from our esteemed legislators, as reported by syndicators and bloggers alike.

So, here is the latest think, as  published on June 11th, 2010, by the Wall Street Journal.  It's a somewhat insightful, somewhat humerous, article written by David Kocieniewski entitled "What an Estate Looks Like to the Taxman."  Give it a read and drop a comment below so that others can gain your perspective.

Thanks to Attorney Joseph Hahn who brought this article to my attention via his blog entitled, "Hahn's Estate Planning Blog."

Comment (0)

Some people say that 2010 is a good year to die.  That's because there are no estate taxes for this year.  But, don't get too excited - the estate tax comes back with a vengeance in 2011.  Attorney, Hyman Darling, Chairman of the Estate Planning, Elder Law Department of Bacon Wilson, P.C., Springfield, Massachusetts, explains it all in this video:

Comment (0)

As you know, the federal estate tax was repealed as of December 31st of last year and Congress has yet to do anything about it.

Now, however, there is movement afoot among Senate Republicans and Democrats to put an estate tax deal together in an effort to pass a bipartisan jobs bill. 

Here's the current thinking among Senate leaders.  Democrats want to pass a jobs bill but need at least one Republican vote.  Republicans don't want the estate tax to revert to pre-2001 levels that levied estates over $1 million with a 55% tax.  That would happen automatically beginning in 2011 if Congress fails to pass a new estate tax law before then.   Instead, Republicans would love to see a federal estate tax of 35% on amounts over $5 million.  However, they do appear to be willing to accept an estate tax similar to the one that expired last year; i.e., an estate tax of 45% on amounts over $3.5 million.

So, there's plenty of incentive for Republicans and Democrats to work together to accomplish what each wants.  Democrats want a jobs bill that would likely offer tax credits to employers for hiring unemployed workers.  It would also renew certain tax benefits that expired last year, including the research and development tax credit.

Then there's the issue about when any new estate tax would become effective.  Some would have it retroactively effective to January 1st of this year.   But that may present certain constitutional questions.  At the very least, it would probably create scores of lawsuits by disgruntled taxpayers who received inheritances after the estate tax expired but before Congress got around to passing a new one.  Is it fair to go back after the fact and tax those inheritances?

Comment (0) Read More...

The IRS has released its Statistics of Income (SOI) Bulletin for the fall of 2009.  While this Bulletin may not have great appeal to the average consumer, there are a couple of interesting facts regarding the impact of recent estate tax law changes.

First, the Bulletin shows that the total number of estate tax returns filed between 2001 and 2007 fell significantly - from 108,071 in 2001 to just 38,031 in 2007.  This drop in the number of estate tax returns filed is attributed primarily to the increases in the estate tax exemption occurring during those years.  For example, in 2001, the estate tax exemption was $60,000.  By 2007, the exemption grew to $2 million.  Although the Bulletin does not cover years after 2007, we can anticipate that the number of estate tax returns filed in 2008 and 2009 will continue to decline significantly simply because the exemption has continued to increase.  For 2009, the exemption amount is $3.5 million.

These statistics support the intended goal of Congress in enacting the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001.  In enacting EGTRRA, it was widely anticipated that less than one percent (1%) of the population would be subject to the estate tax.  It appears that the passage of that legislation has had the intended effect.

Second, while there has been a significant reduction in the number of estate tax returns being filed between 2001 and 2007, the number of returns filed for wealthy decedents - those with estates in excess of $3.5 million - increased significantly, from 9,440 in 2001 to 14,281 in 2007.  It is interesting to note, too, that the greatest percentage of increase occurred between 2005 and 2007 - 33.7%.

What this Bulletin does not reveal, is the overall impact on the amount of revenue generated by the estate tax over this period.  While the fewer returns being filed would suggest that the revenue would be decreased proportionately, the increase in the size of wealthy estates may be sufficient to offset any revenue loss from fewer returns being filed.

Comment (0) Read More...

You may recall that current federal estate tax laws provide for a $3.5 million exemption for any individual dying in 2009, with a maximum estate tax rate of 45% for any excess over that amount.  Then, for any individual dying in 2010, the estate tax is repealed.  So, anyone lucky(?) enough to die in 2010 would escape the estate tax all together - no matter how large the estate might be.  That tax break is short lived, however, because the federal estate tax returns for anyone dying in 2011 and beyond, with the exemption reduced to $1 million and the maximum rate for any excess increased to 55%.

That's if Congress doesn't act before the end of 2009.  Whether it will or not depends upon whether the Obama administration and Congress can reach a concensus on a course of action.  So far, there appears to be no consensus at all.  Some favor decreasing the exemption; some want it increased.  Some want to index the exemption for inflation; some don't.  Some want to lower the maximum tax rate; again, some don't.

With little more than 2 months before the end of the year, it seems likely that Congress will take the easy way out and simply extend the current exemption of $3.5 million and the maximum tax rate of 45% until sometime beyond 2010.  That will give the Obama administration and Congress more time to work out a consensus on what the estate tax law should be.  

Unfortunately, that course of action doesn't do much for anyone trying to plan around this uncertainty.   Therefore, the best advice is simply to stay on top of this situation and be ready to act when the time comes.  That means it's probably a good idea to establish a working relationship with your legal and tax advisors.

Comment (0)