There was a great deal of uncertainty throughout the 2010 calendar year regarding the estate tax, and needless to say this made the job of estate planning attorneys rather challenging. The estate tax was repealed for the 2010 calendar year, but under existing laws it was scheduled to return in 2011. Its return was not especially welcome, but the details surrounding the tax were an additional source of concern. In 2009 when the tax was last in effect, the exclusion amount stood at $3.5 million and the rate of taxation was 45%. This is harsh enough, but in 2011 the exclusion was to be just $1 million with the top rate coming in at an inexplicable 55%.
These parameters could be altered via legislative process, and the topic was under discussion by federal lawmakers throughout the year. Without making any kind of partisan stance it was clear that the outcome of the mid-term elections would play a part in the probability of any new legislation being enacted that would ease the estate tax burden. It should be mentioned briefly that those who oppose the tax contend that your estate is comprised of assets that are left over after taxes. Why should they be taxed again at a rate close to or exceeding 50%? The arguments of those in favor the tax seem to center on the vilification of Americans who have earned any modicum of financial success.
As of this day, the matter is behind us due to the passage of a new tax bill that includes an estate tax provision. Rather than the $1 million exclusion and the 55% rate of taxation that was on tap for 2011 under the existing laws, the exclusion is going up to $5 million and the rate is being reduced to 35%. Many would call this is a victory for fairness and common sense, and in light of these changes it may be a good time to schedule an appointment with your estate planning attorney to discuss what this new legislation means to you.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.