Estate Tax Still in Limbo, Estate Planning Might Need Adjusting

Congress still is struggling in its attempts to make some sort of estate tax permanent, which could warrant changes to Estate Planning strategies. The current law will eliminate the estate tax in 2010 but restore the pre-2002 tax law in 2011. Without a change that means in a few years a large number of middle class estates will pay significant estate taxes.

Attempts to pass a permanent estate tax law have had difficulties this summer.

The President favors as permanent repeal of the estate tax, as does the House of Representatives. The Senate cannot get 60 votes to avoid a filibuster of full repeal, so it passed a bill with a high exemption that would repeal the tax for most estates.

The House responded with a bill that would exempt estates up to $5 million per person and impose a 15% rate on most estates above that level. The largest estates would pay twice that rate. So far, that proposal has not been able to garner 60 votes in the Senate.

For now, the tax law remains uncertain. Estate owners must incorporate flexibility into their plans as discussed in our past visits and wait for Congress to develop a permanent solution.

Bob Carlson is the editor of the monthly newsletter, Retirement Watch, the monthly video series, Retirement Watch Spotlight, and a weekly free e-letter, Retirement Watch Weekly. In these, he provides independent, objective research covering all the financial issues of retirement and estate  planning.

Mr. Carlson, is also Chairman of the Board of Trustees of the Fairfax County Employees’ Retirement System, which has over $2.8 billion in assets, and has served on the board since 1992. He was a member of the Board of Trustees of the Virginia Retirement System, which oversaw $42 billion in assets, from 2001-2005.