President Obama signed the Supplemental Appropriations Bill on July 29th. How does this pertain to estate planning? The Supplemental Appropriations Bill (H.R. 4899) was the Bill containing the House-passed restrictions on GRATS. The House Bill required a minimum term of 10 years for all GRATS. However, as the Bill made its way through the Senate and finally to the President, language restricting GRATS was stripped from the Bill and the 2-year rolling GRAT strategy survived. I have written extensively about GRATS in prior Posts. GRATS are an advanced gifting strategy allowing affluent individuals to pass assets to the next generation at little or reduced gift tax cost.
What else has Congress been talking about in the estate tax area? Primarily two immediate issues:
1) Should the estate tax, which is eliminated for decedents in 2010, be applied retroactively? This means Congress could still pass a law before 2011 to apply estate tax on decedents who died on or after January 1, 2010. The purpose would be to lasso millionaires and billionaires (e.g., George Steinbrenner) who have died in 2010 and who, under current law, avoid paying any estate tax. It is certain there would be a challenge to the constitutionality of a retroactive estate tax.
2) Should the estate tax exemption amount, which automatically is reduced to $1 million for those who die in 2011 forward, be raised to the 2009 level, which is $3.5 million, or increased even higher ($5 million) as some Senators propose. Those of us who practice in the estate tax area used to think it was extremely unlikely that Congress would let the exemption amount fall to $1 million, but now it is not so unlikely.