Does the Rumored Tax Plan Impact the Estate Tax?

A number of media reports state that President Obama and Congressional Republicans have agreed on a tax/budget deal yesterday, December 6, 2010. I will not speak to the politics of the deal, but the question is how that compromise impacts the 2011 Federal Estate Tax. It appears that the agreement will essentially contour the estate tax proposal put forward by Senators Kyl and Lincoln in July and had the backing of the American Farm Bureau Federation.

I analyzed that proposal in September but the alleged major elements for the next two years include:

  • Setting the estate tax rate at 35 percent, and
  • Having a $5.0 million exemption level.

But there are no reports on other estate tax issues including estate and generation skipping transfer taxes will be applied retroactively for the 2010 tax year; whether the lower gift tax rate that is currently in effect for the 2010 tax year will be recognized;whether portability of the estate tax exemption between married couples will be a part of the new law; and if a GRAT will be required to have a minimum term of 10 years.

While the deal was made between President Obama and Congressional Republicans, several Congressional Democrats are likely to be a speed bump to the estate tax compromise. A number of Congressional Democrats have come out stating they are not happy with the deal.

“I’m not at all happy with this. I want to see all the details before I make some kind of commitment,” Democratic Sen. Sherrod Brown of Ohio said.

Asked if President Barack Obama “caved” to Republicans, Brown said: “I don’t know if he caved. I think he could have gotten a better agreement.”

Representative Conyers has flat-out said “no” to the deal.  Earlier this month Senator Baucus proposed a tax package that would have essentially returned the Federal Estate Tax back to 2009 with additional restrictions on GRATs and increased gift tax rate which a number of Democrats feel is a better compromise.

Even with this compromise, I think the next couple of weeks will be very interesting to see what the final deal looks like.


About Chris Guest

I am a trust and estate planning attorney working in the Washington, DC metro area. I offer comprehensive estate planning, trust administration, probate services and general business counseling for accountants, attorneys, business owners, consultants, federal and local government employees, retirees, other business professionals and other individuals.
This entry was posted in Federal Estate Tax, Income Tax, Uncategorized. Bookmark the permalink.

One Response to Does the Rumored Tax Plan Impact the Estate Tax?

  1. Pingback: Why the rise in the Federal Estate Tax Exemption to $5 million shouldn’t stop you from planning your estate? | VA Estate Planner

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