Estate Planning

Thoughts on the Future of the Federal Estate Tax

By Gregory Herman-Giddens

This week I'm in Orlando at the University of Miami School of Law's Heckerling Estate Planning Institute.  Yesterday there was a discussion of what may be coming down the pike as to the federal estate tax (death tax):

Date of New Legislation:  It's unlikely there will be any action until after the November 2008 election.  There are 35 seats open in the Senate, 23 of which are currently occupied by Republicans.  The democrats will probably end up with the majority.  In any event, we will probably see no movement until 2009.

Chance of Outright Repeal: No way, even if the Republicans are in charge.

Exemption Amount: The current amount exempt from federal estate taxes is $2 million, and it is scheduled to rise to $3.5 million in 2009. With a Democrat in the White house and a Democrat controlled Senate, the exemption would probably stay at $3.5 million for a number of years.  If the Republicans are in control, the exemption will most likely be increased to $5 million.  Any increases in the exemption as part of the 2009 legislation over $3.5 million per person would not be available in that year, but would instead be phased in over several years. The phase-in could be similar to what was proposed in HR 5970 in July 2006.

Rate:  We will probably see the top rate decrease from the current 45% to 35%, although very large estates may face a higher rate.

"Portability" of Exemption Between Spouses:  Very likely that the new legislation would provide that the surviving spouse could utilize both exemptions, in a manner similar to that proposed in HR 5970 and HR 5638. 

Full post as published by North Carolina Estate Planning Blog on January 15, 2008 (boomark / email).