Friday, September 18, 2009

Lower estate tax exemptions?

Writing at Leimberg Information Systems ($) Jeff Scroggin suggests that a need for new revenue next year, coupled with the political difficulty of raising income taxes broadly in an election year, could lead to another stalemate over estate tax reform. The conventional wisdom for 2009 is that we will see a one-year patch of the 2009 rules. For 2010, Scroggin thinks there's a 40% chance that Congress will do nothing at all, allowing the exemption to fall back to $1 million and tax rates to zoom, with a top rate of 60% for those in the $10 million to $17 million range. He also rates the chance of permanent estate tax reform with a $2 million exemption at 40%. The President's proposal to make the $3.5 million exemption permanent has only a 10% chance of being enacted, per Scroggin.

Although death taxes do not enjoy popular support, Scroggin argues persuasively that increased income taxes when the economy is still struggling would be far more unpopular. He goes on to warn estate planners that they need to be getting their clients ready for the fact that liquidity planning to meet death tax obligations could become far more important in the near future.

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