Monday, February 09, 2009

Whither the Estate Tax?

Only believers in the Tooth Fairy expect the federal estate tax to vanish as scheduled next year. What will happen? Three theories circulate:

Stay the same. As noted with approval on Freakonomics, President Obama is thought to still favor continuing the tax at this year's level: 45% of everything over $3.5 million.

Lower exemption. Some (many?) estate planners have warned clients that a populist backlash against "the greedy rich" could spur Congress to lower the $3.5-million exemption.

Higher exemption. At the 3% withdrawal rate favored by Tiger 21 members and other cautious wealth holders, a $3.5 million inheritance would give an heir less than $115,000 a year to live on. Even twice that amount won't allow you to live rich these days. See You Try to Live on 500K .
Posted by JLM at 9:10 AM
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1 comment:

Jim Gust said...

Jonathan Blattmachr may believe in the tooth fairy. My understanding is that he warned attendees at the Heckerling Institute to not depend on Congressional reform of the estate tax this year. He said that a potent economic case can be made that the estate tax is a job killer, and we don't need that.

My assumption has been been that we would freeze the 2009 law, but there hasn't been much movement on that yet.

9:53 AM

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