A common mistake

In his story on CBS radio reporting that the House of Representatives voted 272 to 162 to make the repeal of the federal estate tax permanent in 2010, the reporter said (this from my memory) "This year a couple can inherit $3 million free of estate tax."

Inherit? Well, the difference between an inheritance tax and the estate tax is confusing to many people, especially as they are both "death taxes" and that phrase has been used as a stand-in for "estate tax." The mix-up seems inevitable. Trouble is, what the reporter needed to say to be accurate couldn't be fit into a radio soundbite. The actual estate tax exemption this year is only $1.5 million. True, with rudimentary estate planning a married couple could double that to $3 million, but they'd also both have to die this year. The odds of that happening are rather low.

If well educated radio reporters can't understand this stuff, can we expect better from trust prospects? What is the best way to illustrate the importance of planning for taxes at death?