You--or your clients--might just as well go on living.
The year 2010 is the year that the estate tax is supposed to disappear completely before reappearing the following year, but with 2001 rates reinstated. Such was the legerdemain of the vaunted Bush tax cuts, but like most sleight-of-hand tricks it was based on smoke and mirrors and a big dose of willing suspension of disbelief.
From this vantage point, in the twilight days of the Bush administration, it is hard to believe that something so absurd on the face of it could have been enshrined in legislation that was passed with an enormous amount of self-preening.
You'll remember that when the Economic Growth and Tax Relief Reconciliation Act was passed in 2001 the projected budget surplus was in the trillions of dollars. We could easily afford to be generous with the millionaires and billionaires who would be paying estate taxes, the thinking went, and give them a break they so richly deserved.
Well, we know what happened to those projected surpluses whose seeds were planted in the Clinton years. Let's not forget to give a tip of the hat to Alan Greenspan for his part in scorching those seeds. Thank you, Mr. Fed.
One of the things that this "let's pretend 2010 doesn't exist" provision truly has done over the years is wreak havoc with sensible long-range financial planning. Thus, the continuing joke (with the serious undercurrent) that if you were going to pick any year to die, this would be it.
Under the law, the estate tax exemption for 2009 is $3.5 million per person, with a 45% maximum rate for estates above that.
A consensus seems to be forming that Congress is unlikely to let the law stand and forego the revenue that would evaporate if there were no estate tax in 2010. A few weeks ago, Ken Kies, a tax counsel for AALU, told National Underwriter's Arthur Postal: "Something will have to happen in 2009. There is an implied consensus that they cannot let 2010 possibly happen with a zero estate tax."
Extending the 2009 rates into 2010 "buys Congress an extra year to debate a permanent solution to the estate tax issue," Kies added.
A couple of weeks later at a Senate Finance Committee hearing, Leonard Berman, director of the Tax Policy Center and a senior fellow at the Urban Institute in Washington, said, "It seems unlikely that Congress will simply let the tax cuts expire as scheduled."
He continued: "The estate tax is obviously fraught with controversy, but a reasonable compromise would be to extend the 2009 exemption of $3.5 million and top tax rate of 45%. This would exempt all but very wealthy estates from the tax and might defuse the issue politically."
The last part of Berman's statement may be based more on wishful thinking than reality. Those same people who brilliantly transformed the estate tax into the "death tax" and then dishonestly and noisily marketed it as applying to peons and plutocrats and everyone in between are not going to give up.
They're not going to be happy until every year is just like EGTRRA says 2010 is supposed to be, estate tax-free and filled with laughter all the way to the grave.
Despite these diehards, however, it's looking more and more like Congress will decide it likes laughing last.
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|Title Annotation:||THE EDITOR'S EDGE; estate planning|
|Publication:||National Underwriter Life & Health|
|Date:||May 26, 2008|
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