Alexandria, VA Estate Planning Blog

Thursday, December 17, 2009

Plan Today and Avoid the Estate Tax Repeal Trap

As reported in the Wall Street Journal, the Federal Estate Tax will likely expire on January 1rst. n1 Consumed by Health Care Reform, and in an unsurprising expression of absolute inaptitude, Congress recently failed to pass an extension of the Estate Tax. Consequently people should speak with their tax advisors regarding how they will be affected by the complex rules and growing uncertainty.

Don't assume that the repeal will be a tax benefit to your beneficiaries. The income tax consequences can be dramatic. Many beneficiaries could potentially save hundreds of thousands of dollars if the Estate Tax (under its 2009 form) is in effect. In many instances, the Estate Tax rules have provided for very favorable basis rules that have been a tax benefit to beneficiaries. 

Don't assume that the repeal will be a tax benefit for you. First, with proper planning an estate planning attorney can shield many millions of dollars from the Estate Tax. The result may be little to no actual Estate Tax liability. Second, the repeal is merely temporary. If Congress continues to do nothing, the Estate Tax will be reinstated in 2011. The reinstated Estate Tax would be much more expansive in scope. Consequently many more people would be subject to the Estate Tax. Third, Congress may pass retroactive Estate Tax legislation to capture Estate Taxes for decedents dying in 2010. If you die in 2010, without planning for the Estate Tax, and Congress passes retroactive legislation, then you may have inadvertently been snared in a tax trap. The result could be finacially devastating.

Don’t be lulled to sleep by the seemingly inevitable Estate Tax repeal. The rules will most certainly change, and future legislation is likely.  Don’t delay talking to your tax advisor because you are overwhelmed by the complex rules and uncertainty. It's very important that you consult an estate planning attorney. Contact us today and let a knowledgeable estate planning professional go to work for you.

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) was passed by the 107th Congress. Generally, the EGTRRA repeals the Estate and Generation Skipping Taxes (GST), for persons who, respectively, die or make GST transfers after December 31, 2009. However other particular rules apply (i.e. Qualified Domestic Trusts).
n1 The Wall Street Journal, Effort to Extend Estate Tax Fails: Levy Set To Expire Jan. 1, Setting Up A Political Standoff; Democrats Promise New Push, Authored by John D. McKinnon and Martin Vaughan, December 17 2009,

Authored by Luke Anthony Lenzi, Esquire  

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