The State of Estate Tax Under Obama
- Posted in: Estate Planning
When President Bush was elected in 2000, one of his campaign pledges was to make the estate tax go away. And Congress did, in fact, pass legislation that would abolish the estate tax. Well, sort of.
What the Congress passed, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGGTRA) enacted a series of increases in the amount of money your estate could keep without paying “death taxes” — by increases in amount of the estate tax exemption, leading eventually to abolition of the tax. There was a big catch, however. One of the most notable characteristics of EGTRRA is that its provisions are designed to "sunset," or revert to the provisions that were in effect before it was passed. EGTRRA will sunset on January 1, 2011 unless further legislation is enacted to make its changes permanent. But we may not have to wait even that long. According to today’s Wall Street Journal:
"The Senate Finance Committee will move within weeks on legislation to reverse that law, and Mr. Obama is expected to detail his estate-tax preservation proposal in his budget next month, congressional tax writers said.
“Under the Obama plan detailed during the campaign, the estate tax would be locked in permanently at the rate and exemption levels that took effect this year. That would exempt estates of $3.5 million — $7 million for couples — from any taxation. The value of estates above that would be taxed at 45%. If the tax were returned to Clinton-era levels, it would exclude $1 million from taxation with the rest taxed at 55%.”
Bottom line: if you were one of the few who expected the estate tax to actually go away, you were mistaken. As the laws change, it is important that you have your current plan reviewed to make sure it is up to date. And if you haven’t yet created an estate plan, you should come see us for a plan that takes all these new realities into account.