ESTATE TAX REPEAL, DON’T BET ON IT! By: Abe Bernstein President Bush implemented The Economic Growth and Tax Relief Reconciliation Act of 2001, which calls for a gradual reduction in the top tax rate and an increase in the applicable credit until 2010. In that year estate taxes (but not gift taxes) are eliminated, however in 2011 the exemption goes back to $1 million and the assets above are taxed currently from 41 – 50% of your total estate. To add insult to injury the taxes are due 9 months after your death. The repeal of federal estate taxes which was proposed most recently under the present Republican administration is highly unlikely due to the democratic controlled congress and House of Representatives. Additionally, the proposed elimination of estate taxes was discussed prior to 9-11-2001, Hurricane Katrina and the two wars we are now fighting. The loss of the estate tax revenue and the many billions of dollars it represents to the U.S. government is simply something we cannot afford, given our current economic and political climate. The bottom line is it is easier to tax dead people than it is to tax living people, because dead people don’t vote. Therefore when push comes to shove the estate tax issue will not be dealt with until after the 2008 election According to various members of congress it is going to depend on whether there is a future Federal budget surplus or not. There has been discussion in congress about increasing the exemption to $3.5 million per person with a 45% estate tax rate above this amount but frankly nobody can predict what will ultimately happen but the one thing everyone in congress is in agreement on is that Federal estate taxes will not be repealed. We have not discussed individual state estate taxes which also have to be paid by estates , remember many states have their own state estate taxes which have to be paid in addition to the federal estate taxes. The biggest problem in estate planning is procrastination, not the IRS. When addressed, estate planning is a simple process which is really life planning, not death planning. Many clients have asked, “What is the difference between death planning and estate planning?” I tell them that strategic planning now will protect the growth of their investments for their families & favorite charities. The biggest villain in estate planning is not the IRS, but procrastination. I have found in my 45 years of practice, that America has two tax systems, one for the informed and one for the uninformed. With proper advice, an individual can become one of the informed and can legally disinherit the IRS! It is imperative for all individuals to do proper estate planning now. The setting up of a Simple Credit Shelter Trust for a family with assets of $5 million dollars will save almost $1 million dollars in combined federal & state estate taxes. The ball is in your court. Who do you want to be the largest beneficiary of your estate, the IRS or your family? It is up to you to initiate the estate planning process with knowledgeable advisors, and in doing so, create tremendous advantage for yourself, your family and your favorite charities. Year Applicable credit Equivalent exemption 2002-2003 $345,800 $1,000,000 2004-2005 555,800 1,500,000 2006-2008 780,000 2,000,000 2009 1,455,800 3,500,000 2010 N/A N/A 2011 and later 345,800 1,000,000Note: For gifts made during life, the applicable credit is limited to $345,800 ($1,000,000 exemption)
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