Estate Planning as a Career

The Economic Growth and Tax Relief Reconciliation Act of 2001 was hailed as the death of the dreaded estate tax. The battle was long and hard but well fought. People wrote to their Congressmen, prodded their organizations to support the bill, and generally made a lot of ruckus. Many have lauded the demise of the death tax, yet to paraphrase Samuel Clemens, the reports of its demise are somewhat exaggerated.

The act in question merely provided for ten years of exemptions from the estate tax, it did not repeal it. As of this year, the law exempts the first $2 million of an estate for an individual, or the first $4 million for a married couple. Meanwhile, it levies a hefty 45% extortion on all amounts over the magical $2 million mark. But it does completely disappear in 2010, doesn’t it?

In fact a bevy of politicians got elected on just this premise. As usual, no one bothered to examine the fine print. Most observers surmised that this cumbersome tax had been abolished - when in fact it is only a ticking time bomb, with a fuse set to explode in just four years. It seems that whenever Congress passes an onerous law that puts an undue burden upon us, it stays on the books until we fight to have it repealed; in the rare instance where we get them to repeal one of these ugly laws, they include a trap door. So now, We the People are going to have to lobby all over again one the reverse sunset clause takes hold and the trap door falls.

This piece of legislative trickery calls for the inheritance tax to be restored automatically in 2011. How could it be worse than that, you may ask? Well, it is worse because it comes back with a top rate of 55%, and an estate exemption of only $1 million. In case this is all news to you, let us attempt to explain.

The federal inheritance tax is assessed against the remaining property of someone who die (more…)