You may remember that the President Bush tax cuts of 2001 included a provision to repeal the estate tax in 2010; we’ve finally reached that year, so what happens now? Before we get to that, let’s discuss some basics.
What is the estate tax?
The federal estate tax is a tax imposed by the government on the transfer of property from one person to another upon death; some states have estate tax as well.
Isn’t the estate tax “dead?”
Yes—for 2010. The federal estate tax was repealed for the 2010 tax year, but unless Congress acts, it will be back in 2011; as it stands now, the law would require an estate tax return filed for anyone who dies in 2011 and whose estate is worth $1 million or more. The estate tax rate on those estates would be 55%.
Is Congress doing anything about the estate tax now?
Even though it’s not making a huge splash on network and cable news, discussion over the estate tax is actually one of the hottest issues in Congress right now. The main discussions are about what the threshold value of estates should be before tax kicks in as well as how much tax should be applied.
President Obama proposed exempting estates worth $3.5 million or less ($7 million for married couples) and taxing estates worth more than that at 45%; some senators would agree to that, but then would like to gradually raise the exemption to $5 million and lower the tax rate to 35%.
However, these two comments came out of the committee discussing the estate tax earlier this week:
- “Nothing is clear about how the estate tax will be considered. . . . Last week I believed there was an agreement on what the details were going to be. That may not be the case now,” said Sen. Jon Kyl (R – Ariz.).
- “There’s no agreement on estate tax, neither on substance nor on process. None whatsoever,” said Senate Finance Committee Chairman Max Baucus (D – Mont.).
So for right now, no one is sure how things will shake out, so watch this space for updates.
Source: US Senate Effort to Reduce Estate Tax Hits Turbulence at Nasdaq.com.
What can I do regarding the estate tax?
Aside from contacting your senators and representatives to let them know what you think about the estate tax, remember that May is National Make-A-Will Month; now is the perfect time to take care of all your estate planning needs. When you’re ready to protect your loved ones in the event of your death, LegalZoom can help.