Estate Tax Watch (continued)

Ever since Congress modified the federal estate tax in 2000, we have been predicting additional changes because the provisions of the 2000 Act were (to be charitable) unusual.  The Act provided that the personal exemption for each person on death would gradually increase to $3,500,000 until 2010 when the tax would go out of existence altogether; then strangely enough, in 2011 the tax would return with a vengeance and the personal exemption would drop to $1,000,000!  It has made estate planning a perilous business.

As far back as 2006 we predicted that further amendment to the Act was inevitable; we believed that the tax would not expire in 2010 and that the personal exemption would be set permanently in the range of $4,000,000.  As of this writing Congress has turned its attention to the issue; the House of Representatives on December 3, 2009, has passed a bill which would preserve the exemption at $3,500,000 and would reinstate the tax in 2010.  The tax rate (45%) is retained in the pending legislation 

There is pressure to reduce the rate to 35% and increase the exemption to $4,000,000, but it is anyone’s guess exactly what the Senate will do with the bill.  What is a near-certainty is that something will be done, and it will probably resemble closely the House bill.

If you have an estate which approaches $3.5 million, (including all assets such as life insurance, IRA’s, 401K plans, etc.) you are well advised to keep your eye on the progress of the bill as it affects you.  We welcome your calls with any questions.

 — Ken Butera


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