Death and Taxes
Right now, 2010 is a year to die for.
Those who die in 2010 won’t be taxed on their estates, although their heirs will have to pay capital gains taxes on inherited assets when they sell them.
Unless President Obama and Congress work quickly to stop it, the estate tax – sometimes referred to as “the death tax” – will be dead for one year come January 1, 2010. However, it will return with a vengeance in 2011 to the pre-Bush levels of 55% on the first $1 million of an estate.
Since 2001, the tax rate has decreased steadily and the estate value exempted has increased. As per legislation passed that year as part of President George W. Bush’s $1.35 trillion tax cuts, the estate tax is set to disappear entirely in 2010 for just one year.
President Obama proposes a permanent estate tax of 45% exempting the first $3.5 million of an estate ($7 million for married couples). Congressional Republicans want to see the repeal go into effect as planned, though political analysts don’t see that happening. There is a push for Congress to vote to exten the 2009 rules through 2010, essentially punting the issue of a permanent fix until next year.
However, the compromise promoted by Senators John Kyl (R-Ariz.) and Blanche Lincoln (D- Ark.) is gaining a lot of support from lobbyists for small business, agriculture, manufacturing, and other industries. Under that plan, the permanent estate tax rate would be 35% exempting the first $5 million.
Congressional focus is still on health care, but this is certainly one issue to watch as the year winds down.
James D. Perry
Tags: Estate Planning, Estate Tax
