Future Federal Estate Tax System: Still Looking For Answers for 2011
By: Douglas L. Kaune, Esquire
Estate planning attorneys and their clients would like to know what the future of the federal estate tax system holds for them. As many know, we are in uncharted territory with no federal estate tax in 2010, with an ominous return of the tax system slated for 2011. The return of the “Death Tax” as the law is written now woould see the tax applying for every dollar over $1 million in a decedent’s estate. The top marginal rate of 55% in 2011 would make for a hefty tax bill in many estates.
There is speculation that Congress will swoop in at the end of the year to modify the federal estate tax law to increase the credit amount and/or lower the top marginal rates. Unfortunately, there is no way to tell what changes, if any, will be imposed by Congress. After all, this is the same Congress that allowed the tax to lapse at the end of 2009 and has forced us to drive blind for the first 7 months of 2010. Read this mid year CNN Money article for some additional insight by clicking this link.
Many clients are taking affirmative action in preparation for the likely return of the federal estate tax. Others are readying for end of the year 2010 with planning and documents to be signed into effect once they have a better idea of how the federal estate tax issues will play out in Congress. Some might even consider taking advantage of moderately lower gift tax rates of 35% for every dollar gifted in excess of $1 million In 2010. By paying the gift tax at 35% these clients might avoid a tax on these same dollars at the highest federal estate and gift tax rate of 55% in 2011. Regardless of your decision regarding planning now, you should be very careful to watch how the federal estate tax law progresses.