Wall St. Journal: “An elderly client recently asked . . . an attorney . . . whether her children would inherit her considerable estate if she committed suicide this year. His response: ‘I took a long, hard look at her, and said, ‘I'm going to make believe I didn't hear that question.” Welcome to the macabre world of estate planning 2010, where such questions are relevant.”
Wall St. Journal: “Without Congressional action, [the death tax] returns with a 55% rate vengeance in 26 days. Without action in the lame duck Congress, the estate tax will rise from the dead on January 1 with a vengeance, the rate climbing back to 55% from zero this year. The exemption amount will revert to a miserly $1 million, unindexed for inflation, so more middle class taxpayers will get hit year after year.”
Wall St. Journal: “The return of the estate tax in 2011 presents dilemmas even more gruesome than those of a year ago, when taxpayers clung to life past Jan. 1, 2010, to escape death duties their estates would have owed in 2009. This year, by contrast, the tax code is giving taxpayers an incentive not to live but to die—saving heirs as much as 55 cents of tax on a dollar of assets.”
New York Times: “The Obama administration’s proposal for the estate tax has all of the ingredients of a damaging tax – large exemptions and loopholes, confiscatory marginal tax rates and little revenue potential. The best reason for having such a tax, if there is one, is to tap into any punish-the-rich sentiment that may be in the electorate. . . . But the huge potential for avoidance behavior is exactly why the proposal is so damaging from an economic point of view.”
Wall St. Journal: “The estates of those who died this year might be allowed to be taxed as if they died in 2009, in order to resolve a problem created by the repeal of the estate tax, a Treasury Department official said.”
Wealth Strategies published a two-in-one article. The first topic is about the estate of novelist Frank Kafka: “If Franz Kafka were writing a short story about an estate, it would undoubtedly have featured his signature themes of autobiographic reflections, alienation, and betrayal while caught in the teeth of a pointless and irrational bureaucratic nightmare.”
The second topic is about the problems to be created by the expiration of the Bush tax cuts. “Behold and beware: Ancient CPAs and tax attorneys foretell of a perilous time at the End of Days…otherwise known colloquially as the expiration of the Bush tax cuts on January 1, 2011.”
USA Today has a column written by Abigail Disney, granddaughter of Roy Disney who co-founded the Disney company with his brother Walt. Abigail says that as a person who inherited great wealth like other Disney children, grandchildren and great grandchildren, the federal estate tax is a wonderful thing.
WebCPA: “with the passing of Boss George Steinbrenner, there may soon be even more reason to loathe the Bronx Bombers and all they stand for. The reason here isn’t some new ace pitcher they bought from another team, but rather the estate tax law.”
The New York Post has a story on the late Yankee owner George Steinbrenner's last will and testament that was recently filed in a Tampa, Florida, probate court. The big question for the estate is whether Congress will enact a retroactive estate tax that applies to people like George Steinbrenner who die in 2010 while there is no federal estate tax.
Two stories in which the author's speculate on what Congress will do about the federal estate tax. The first is “Be prepared for return of estate tax” which states “There’s never really a bad time to do estate planning. But in the months ahead, you may have an extra incentive to look at your estate plans. Why? Because changes are coming to estate tax laws — so you’ll want to be ready.” The second article is “Congress likely to punt on estate tax until fall – or later,” which starts: “But reversion to 55% tax and $1M exemption not seen as likely.”
Colorado attorney Lew Dymond, one of my favorite estate planning mentors, posted an article on the WealthCounsel blog about the consequences of the expiration on January 1, 2011, of the “Economic Growth and Tax Relief Reconciliation Act of 2001,” aka EGTRRA.
Phoenix Business Journal: “When Congress returns in September, it will have four months to do what it has failed to do in the past nine years: fix the absurd situation it created for the estate tax.”
The Wall St. Journal has a timely article on the consequences arising from the death of people during 2010 when the stepped up basis rules applicable to inherited property is replaced by a carry over basis rule. The article states,
Under current law, heirs of 2010 estates who sell assets at any point in the future could owe capital-gains taxes measured from the original owner's purchase price. . . . If you plan on leaving your heirs valuables, be warned: The tax code requires that objects worth more than $3,000 must have their value confirmed by an appraiser.”
For those of you who want to get down and dirty with respect to the federal generation-skipping tax, then “Time Traveling and Generation-Skipping in 2010 and Beyond,” is a must read. Here's the abstract:
“In this article, McCaffrey and Schneider look at the GSTT, its prospects, and the complications that the 2010 suspension of its application and its future reinstatement are likely to cause. The one-year reprieve from the GSTT creates several difficult questions.”
The Heritage Foundation: “2010 is the only year since 1916 in which heirs to an estate will not have to pay the dreaded death tax. Victory for small businesses? Not yet—due to a legal quirk, the death tax is scheduled to come back to life in 2011. Studies, statistics, and real life have shown again and again that the businesses and families burdened with the death tax often see themselves forced to cut back on benefits, investments, and employees. The death tax keeps new jobs from being created, hurting not just the affected businesses, but the economy as a whole. Because it is a tax on capital, the death tax destroys as many as 1.5 million jobs that the economy needs as it struggles to recover. Heritage Foundation tax policy expert Curtis Dubay details a replacement for the death tax, and explains why Congress must kill the death tax—now.”
The Probate Lawyer Blog: “there's another quirk about the estate tax law that makes it even less likely that the Steinbrenner family will ever sell the team. The estate tax loophole has a catch. In 2010, heirs of the very wealthy do not get to enjoy a typical tax savings called “step-up in basis”. What does this mean? . . . This means that the Steinbrenner heirs have the same tax “basis” that George did when he bought the franchise back in 1973 for a mere $10 million.”
Wall St. Journal: “Did George Steinbrenner save his heirs millions by dying in 2010? Forbes recently estimated the Yankees owner’s net worth at $1.1 billion, largely from the YES network. The New York Yankees, which he acquired in 1973 for $10 million, are now worth $1.6 billion but are 95% leveraged due to debt from the new Yankee Stadium, according to Forbes. Because Steinbrenner died in a year when there is no federal estate tax, he potentially saved his heirs a 55% estate tax on his assets — or a tax bill of about $600 million.”
Wall St. Journal: “Vermont independent Sen. Bernie Sanders and three Senate Democrats Thursday proposed an estate-tax plan that would hit wealthier taxpayers harder than another proposal on the table. The estate tax lapsed temporarily on Jan. 1 after the Senate failed to extend it last year. If lawmakers do nothing, the tax will resume in 2011 with a 55% rate on estates above about $1.2 million. Last year, estates of more than $3.5 million for an individual were subject to a 45% tax.”
New York Times: “A Texas pipeline tycoon who died two months ago may become the first American billionaire allowed to pass his fortune to his children and grandchildren tax-free. Dan L. Duncan, a soft-spoken farm boy who started with $10,000 and two propane trucks, and built a network of natural gas processing plants and pipelines that made him the richest person in Houston . . . .”