Death and Taxes, Part III
There are a lot of things to look forward to in 2010, but those of us in estate planning and probate law were hoping for one last act of 2009 – Congressional action on the Death Tax.
The Death Tax officially died at midnight, December 31, 2009 meaning that any taxpayer dying in 2010 will not have to pay taxes on his or her estate. It will resurrect itself on January 1, 2011 at Clinton-era levels exempting only the first $1 million with a 55 percent tax rate.
Despite the appealing zero percent tax rate against estates, the hidden danger lies in recent changes to the capital gains tax laws. Heirs face heavy capital gains taxes on the sales of any inherited assets, which may potentially be more costly overall than the death tax.
President Barack Obama and members of Congress have indicated that they want to freeze the levy at 2009 levels ($3.5 million exemption, 45 percent tax) instead of letting it expire.
The House voted in December to put this plan into law. The Senate, though, declined to act until a more permanent solution was found.
It’s expected now that the Senate will take action (when, we’re not sure) and apply any new tax law retroactively. That move may face legal challenges and it still doesn’t help those looking to put into place a responsible estate plan.
Without government action, it is difficult for estate planning lawyers to properly advise clients.
Until this is resolved, all eyes are on The Hill.
James D. Perry
