Jun 18, 2010
Death & Taxes
Consider this…
You know the old adage that death and taxes are the only sure things in life? Well for the time being at least one of those certainties is in question – on January 1 of this year, the tax on estates disappeared. It went to zero. That’s right, zero.
Just last week, the New York Times ran an article about a Texas billionaire who died in March. Under current law his heirs will avoid billions in taxes that they would have otherwise paid if he’d died three months earlier or nine months later.
So Congress must be working night and day to resolve the issue right? Wrong. With half of 2010 behind us, there is no clear plan to deal with the estate tax. The House has passed legislation (H.R. 4154) to continue the tax at 2009 levels but an agreement in the Senate is nowhere in sight. Just last month, when rumors of an estate tax deal were swirling, the Chairman of the Senate Finance Committee Max Baucus (D-MT) put an end to those rumors by saying, “there’s no agreement on the estate tax on either the substance or process. None whatsoever.”
Next year, the rate is due to jump to 55 percent on estates over $1 million. There are many members of the Senate who’d like to soften that blow. But there are also many members who’d be happy to see the rate go that high or even higher.
There is a glimmer of hope that Congress could renew their discussions on the estate tax in the near future. Senator Blanche Lincoln’s (D-AR) primary win last week may very well restart estate tax discussions. As you may recall, it was Senators Lincoln and Jon Kyl (R-AZ) that had been working very closely on compromise estate tax legislation earlier this year. Fresh off of her win, look for Senator Lincoln to renew her interest in an estate tax fix, though she doesn’t have much time.
All of this is important to the charitable community both because estate planning prompts individuals to consider charitable bequeaths and because if Congress wants to soften the blow, tax increases elsewhere will be needed to help “payfor” the change. And foundations are being eyed as a possible way to pay for reducing the estate tax next year and beyond.
If Congress doesn’t act, the rate goes to 55%. If Congress does act, other taxes will have to go up to help pay for the change. What a choice.
We’re watching this issue closely and will keep you up to date on all the latest developments.