As I write this there are only 14 days left in 2009 and Congress has yet to take action to prevent the massive changes in the estate and gift tax laws that are to take effect on January 1st, 2010. The two biggest changes will be the elimination of the federal estate tax altogether, and its replacement with a new income tax framework which would eliminate the so called “stepped up basis” rule and implement a “carryover basis” scheme.
The radical changes in the tax law will makes things difficult for professional advisors and their clients for a while as everyone learns the new rules, discards old planing tools, and reorients themselves. Unfortunately, without Congressional intervention, such difficulties will be compounded just one year later (Jan. 2011) when the laws change again and the estate tax returns in full force and the “carryover basis” scheme goes away. To add insult to injury, the renewed estate tax will be higher (up to 60% vs. 45% today) and the personal exemption amount will drop significantly (to $1 million from $3.5 million today)!
There is some small hope though. As of December 3rd, the House has passed a bill extending the current estate tax regime ($3.5 mill exemption, 45% rate, stepped up basis rule) permanently. Unfortuantely, the Senate seems too locked in the Health Care Debate to pay much attention.
So what are estate tax experts doing? We’re working hard to prepare ourselves and our clients for the worst. Regardless of what happens, you can rest assured that those of us dedicated to this practice will be ready to provide the highest quality advice and counsel. As always, we will ensure our clients save taxes, protect their families and safeguard their assets.
If you have any questions about estate tax planning, please don’t hesitate to call me (Joseph P Donlon, Esq.), or visit our website at www.donlonlaw.com.
New York Wills, Trusts, Estates & Asset Protection Legal Blog 