As the November elections approach, Congressional action to fix the estate tax mess remains uncertain. According to a few Congressional members, such as Republican Senator Grassley of the Senate Finance Committee, it is unlikely the Senate will vote this year on the estate tax bill, meaning in 2011, taxpayers can protect only $1 million from estate tax. Estates exceeding $1 million will be taxed at a maximum 55% tax rate.
There are a number of Senators who prefer a $1 million exemption amount. Others, such as Finance Committee Chairman Baucus, believe a $3.5 million exemption amount and a 45% tax rate is appropriate. These were the levels in place in 2009, and the levels supported by President Obama during his presidential campaign.
For this year only, taxpayers who die pay no estate tax. (At last count there are approximately six billionaires who have died in 2010, including George Steinbrenner, the Yankees owner.) Although it is conceivable Congress could impose a retroactive estate tax to cover taxpayers dying in 2010, it would face a certain Constitutional challenge and is less likely as the year passes.
The Treasury Department is currently scrambling to provide guidance to Executors and Trustees dealing with the complex issues arising from 2010 estates. Even though those dying this year do not have estate tax, because there is no "step up" in the basis of their assets (with limited exceptions), there could be significant income tax to pay when the beneficiaries sell the assets. This is creating significant confusion for 2010 estates.
All in all, Congress’ handling of the estate tax issues has left much to be desired.
Comments