It might surprise you that the hot topic in financial planning right now is not the stock market or the economy. The subject matter revolves around death. With the economy and health care capturing all of the attention of Congress in 2009, no time or energy was paid on the repeal of the estate tax. Current legislation states that any individual who dies on or after January 1, 2010 will owe no Federal estate tax. Prior to this, based on President Bush’s 2001 EGTRA, the amount you could pass estate tax free has risen from $1 million dollars in 2001 to $3.5 million in 2009 with year ten of the Act (2010) being a complete repeal of the estate tax. It was widely anticipated that prior to the estate tax repeal, Congress and President Obama would act to either freeze the figure at $3.5 million dollars or develop a compromise figure that would appease both sides of the aisle. Neither of these transpired.
The delay in addressing the estate tax is in no small part due to the controversy of money and wealth in the first place. On one side of the aisle you may hear the call for the wealthy to ‘pay their share’. They had the opportunity to enjoy their money during life, they should share it at death. On the other side they are saying, “We already paid our share in that all our savings have been taxed at least once already!” Others express concern because estate value is often illiquid as part of a family business or farm, and the 45% tax would decimate their business. No matter your opinion, the fact remains that we are currently in a legal limbo until our government acts.
Some believe that Congress will take action at some point in 2010 and make the amount decided upon retroactive to January 1. Others say this is unconstitutional. No matter the outcome, it would be prudent if you haven’t seen your estate planning attorney in the past few years to schedule an appointment. Having served four widows who have lost their loved ones between age 45 to 65 over the past year, use the fluctuation of estate law as a reason to make sure you are well prepared.