Update: Estate Tax

The tax legislation being discussed and supported by the Republican leadership and President Obama is meeting with some resistance from members of Congress in both parties.  The President is selling the package, having a Tuesday afternoon press conference and by sending VP Biden to the Hill to discuss the proposal.

In addition to many advocates for the the new estate tax, there also seems to be a lot of push back on this bill, with headlines such as the Christian Science Monitor's Estate Tax Deal: Worst Part of a Bad Tax Compromise. From what I have read, the estate tax portion of the agreement may be the most vulnerable for a potential of change of the various proposals, so the deal is not done. With that in mind, the bill still need to pass both the House and Senate and to be signed by President Obama.  All of this needs to be done before the end of the year, in a lame duck session of congress.

I still have not heard many particulars on the estate tax legislation other than the $5 million exemption (I have seen reports of $10 million for couples) and a 35% tax rate.

Forbes has an interesting article on how the new estate tax would negatively impact estate planners.

Many Americans do not have proper estate plans. According to a Lawyer.com survey from earlier this year, there has been a drop in estate planning: only 35% of Americans now report having a will and only 21% have a trust.

Comments by estate planners indicate that the Obama estate tax deal would chill estate planning even further.

(1) Joshua Rubenstein (head of the estate and trust practice at Katten Muchin Rosenman LLP), said that without details it is hard to determine how estate planning would be impacted. But he added, “I would guess that having an estate tax rate equal to the income tax rate will discourage estate planning. Usually people gift if the gift tax and income tax on the carry over basis is less than the estate tax. Having a transfer tax equal to income tax rates will likely make hoarding cheaper.”

Rubenstein further explains, “If the gift tax stays 35% as well, that should cool substantially the rush to pay 35% at year end to save 55% some day when now you might be facing only a 35% estate tax some day.”

Click HERE to read the Forbes article.