As 2011 looms ahead, this past week illustrated just how far we are from estate tax legislation.
On one hand, the Daily Tax Report quoted from Senator Charles Grassley's June 16th Senate floor speech, in which Grassley lamented the return in 2011 of only a $1 million exemption amount and 55% estate tax rates. Grassley favors total repeal, but realistically would accept a compromise that would increase exemption amounts to $5 million ($10 million per married couple who plan properly) and a maximum 35% estate tax rate.
On the other hand, the New York Post reported that Senate Majority Leader Harry Reid said that he will not support a House Bill providing for a $3.5 million exemption amount and a 45% estate tax rate, much less the higher exemption amount that Grassley desires. According to Reid, there are 40 Senate Democrats that believe a $3.5 exemption amount is too generous. The Post quoted a spokesman for Senator Sheldon Whitehouse, Democrat from Rhode Island, as saying "at this time of record deficits...Congress cannot afford to let the estates of millionaires and billionaires go untaxed."
Where does that leave us? Incredibly, with increased odds that there will be only a $1 million exemption amount in 2011, much to the chagrin of most "experts" who predicted that, at the least, a $3.5 million exemption amount would be adopted for 2010 and beyond. (Currently there is no estate tax for only this year, unless Congress chooses to retroactively reinstate it.) November elections could alter the legislative landscape, but how much?
In the meantime, as Congress and the Administration seek revenue, the dismal news continues for the families of wealthy decedents: proposals supported by both the President and the House are taking aim on tried and true solutions for estate tax savings. One such curtailment proceeding to the Senate for consideration is the elimination of two-year rolling GRATS, a strategy allowing taxpayers to pass assets to their children on a tax-advantaged basis. (You can see this Blog for several Posts regarding GRATS.) Although GRATS would still be allowed, their advantages would be largely gutted by requiring at least a 10-year term.