Estate Tax Exemption Legislation, Ball In Senate’s Court–Keeping Close Watch

The race is on to hammer out a new Estate Tax Exemption amount prior to the end of the year, 12-31-09.

As a refresher on this tax; Estate Tax is the tax owed the Federal Government when the last heir of a generation is deceased, i.e. Husband and Wife (Taxes generally due as remaining assets move down in the family legacy, to kids/next generation.)  Also known as a “Death Tax”, the purpose of this tax is to tax wealth as it travels down to the next generation. 

Currently the Estate tax level is $3.5 Million, with a 45% tax on amounts over this level. The level and rate have changed due to various laws over the past several years and are due to be eliminated as of 12-31-09, only to return at much lower levels and historically higher rates as of 1-1-2011, such the urgency for passing some type of law prior to the end of this year.

Estates can be defined broadly by all owned assets, minus liabilities. This definition brings into the equation, raw land, minority ownership interests, royalties, and any assets that may have value, regardless of their liquidity OR cash flow. (It is not uncommon for someone to have a very high estate value, yet low-income, often times tripping unsuspecting heirs as their parents/relatives had no idea of the estimated value of their estate.)

While many applaud the repeal of the Estate/Death Tax as of 12-31-09, we think it unwise to expect this tax to permanently go away.  In our opinion we would much rather have a level that can be planned for today, with some stability in level and rate, rather than the possible roller-coaster (down and up of level and rate) that will occur over the next year.  Let’s keep our fingers crossed, and we will keep you updated. 

See related Bloomberg story Estate Tax Is Extended by U.S. House With Exemption for First $7 Million  

Have a Good Day!


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