Status of Estate Tax Uncertain
The repeal of the U.S. Estate Tax for one year beginning this January 1st, has been common knowledge to estate planners since President George W. Bush repealed the “Death Tax”. The repeal of the Estate Tax includes a provision that the Estate Tax will return in 2011, with a $1,000,000.00 exemption (instead of the current $3,500,000.00 exemption) and a top rate of 55% (instead of a top rate of 45%) that applied in 2009.
During the last three or four years, various proposals have been made in the House and Senate for changes in the Estate Tax. There has been fairly strong support in both the House and Senate for the continuation of the $3,500,000.00 exemption. There was also consideration of other changes in the law that would have been favorable to taxpayers, such as a provision that would allow a surviving spouse to use the balance of the $3,500,000.00 exemption if not all used at the time of the death of the first spouse. If enacted, this provision would provide an opportunity for many clients to simplify their estate planning documents.
Most tax authorities expect that there will be an extension of the $3,500,000.00 exemption that will apply retroactively to this January 1st. The uncertainty of the existence of an Estate Tax for decedents dying after January 1st, and what future Estate Tax laws may be enacted, creates considerable problems for estate planners and their clients. Certainly, for anyone aware of serious health problems and having a substantial estate, it is strongly recommended that such persons immediately seek advice from a competent estate planning attorney. Persons who have previously done estate planning and have Wills providing for Credit Shelter Trusts and/or Marital Trusts, should be aware that significant changes may be required in their estate planning documents once new legislation is passed regarding the Estate Tax.