The temporary absence of a federal estate tax is expected to be addressed by the U.S. House and Ways Committee this month. Rep. Sander Levin, incoming chair of the committee, indicated action could begin as early as April 12, just after Congress returns from spring recess.
Many predicted Congress would take action last year, long before changes – which also include a zero percent generation-skipping transfer tax and dramatically reduced gift tax rate – took place. Instead, a lengthy delay, combined with little direction on what the future tax structure might be, left estate plans across the nation in jeopardy of failure and families unsure how to address potential problems.
“The uncertainty affects all our clients,” said Boston area attorney Hank Whittenberg, a tax and estate planning specialist. Whittenberg suggested many families don’t know how to structure estate plans with so many variables in play. Some consider taking advantage of the lowered gift tax rate – the lowest it’s been since it was enacted in the 1930s – but fear a retroactive penalty if they do. Others face troubling tax challenges with investments and division of assets. “The ambiguity is terrible,” Whittenberg said. “We need something, anything to pass. Just give us some clarity,”
The Economic Growth and Tax Relief Reconciliation Act of 2001 phased the estate tax out over a 10-year period, resulting in a zero percent estate tax in 2010. If unaddressed, the tax will jump back to 2001 levels with a maximum individual exemption of $1 million and top tax rate of 55%. In 2009, the exemption was $3.5 million and rate capped at 45 percent – a far better scenario for taxpayers.
The House is thought to favor a return to 2009 levels and subject estate transfers in 2010 to a retroactive tax. But doing so may pose larger issues. “Constitutional litigators aren’t going to let this fly by without a fight. The notion of enacting a new tax is different than adjusting an existing tax,” Whittenberg said. “But whatever Congress decides, it will impact our clients and the sooner we know what to expect, the better we can meet our clients’ objectives.”
Recognized nationally for expertise in tax planning, Attorney Whittenberg began practicing law more than 15 years ago. He is a partner of Whittenberg Knudsen, LLP, a founding member of WealthCounsel (a national attorney organization of approximately 1,500 estate and wealth strategies attorneys), and a former elected board member of the Member Advisory Board of the National Network of Estate Planning Attorneys. Serving clients throughout the Northeast region, attorneys at Whittenberg Knudsen, LLP focus primarily on estate planning, business law, and probate and trust administration and litigation.
