"Curiouser and curiouser!" cried Alice (she was so much surprised, that for the moment she quite forgot how to speak good English)." These words from "Alice in Wonderland" describe what is going n in Congress in the discussion of the future of the federal estate tax.
If Congress does nothing, the federal estate tax will end on December 31, and there will be no federal estate tax next year. The following year the federal estate tax will return with a vengeance.
The present estate tax exempts estates up to $3,500,000. For a long time there was an agreement in Congress that the present exemption would be continued indefinitely.
It is likely that Congress will do what has been planned. However, the recession, and the resulting budget deficits, is causing some legislators to think again about the estate tax.
H.R. 2023 was recently introduced in the House of Representatives. The bill, which is posted on our website, would change the exemption amount to $2,000,000 per estate, and make the exemption "portable."
Thus, if a husband and wife each had assets of $2,500,000, and one spouse died, leaving $100,000 to children and the rest to the surviving spouse, there would be no tax in the first estate because $1,000,000 would be covered by the exemption and $1,500,000 would be subject to the marital deduction. The surviving spouse would then have an estate of $4,000,000, of which $3,000,000 would be exempt, because of the exemption in the survivor's estate ($2,000,000) plus the amount of the exemption in the first estate which was not used and which could be carried over to the second estate.
Proposed legislation, which might be retroactive, would disallow discounts on property placed in family limited partnerships and similar vehicles and restrict the use of GRATs (Grantor Retained Annuity Trusts).
We will le you know when changes may be needed in your estate plan. In most of the trusts we have prepared we have provided for a "trust protector" who can amend the trust as necessary to achieve the best tax result, so most of our clients will be ready for any new law.
We will be happy to help you with any federal or Massachusetts estate tax problem. Please let us know if you would like us to look over your estate plan.
