So How Will the Election Impact Estate Taxes?

by | Nov 12, 2010 | Estate Planning

Remember, if Congress does not act in the next few weeks, then on January 1, estate taxes will kick in for anyone leaving more than $1 million, with a top tax rate of 55%. Will the new Republican majority in the House make a difference?

1. The election did sweep more anti-estate tax Congressmen into office. But even after the election, there are still fewer estate tax foes than there were under President Bush. And, under President Bush, they were unable to pass any estate tax repeal. Read more about that here.

2. Congress is good at doing nothing! 10 years have passed since the Bush tax cuts. No permanent fix to the estate tax has been done. Even in 2010, when billionaires are dying and the IRS is missing out on its cut, Congress did nothing.

3. Gridlock, anyone? Let’s see, Republicans have a big majority in the house, Democrats have a small majority in the Senate. Getting anything done through both houses will require compromise. What are the odds of that? In one blogger’s straw poll of estate planning professionals, 68% thought Congress would do nothing and let the estate tax come back. “Congress is good at doing nothing.”

4. Many newly elected officials are touting fiscal responsibility. On the Taxes Blog, Kay Bell says:

As much fun as some lawmakers have chanting ‘Kill the death tax,’ the levy still brings in a lot of tax money. And the 112th Congress will contain a lot of folks who won their seats by promising to reduce the deficit.

If members of Congress are forced to choose between keeping tax rates low for the living or taxing the estates of the dearly departed, I’m putting my money on laws that will benefit the taxpayers who will still be around to vote again in the next election.

5. What are you waiting for? Some have waited to do planning to see what Congress does. 10 years of waiting and no progress! You never know what year your number will be up. Waiting? It’s too risky.

So what do you do?

  • Decide what your tax risk is. Most people’s net worth adds up to more than they think. Gather all your asset information and then review your goals.
  • Look at your risk uppers or downers. Do you have things that increase the risk? (Liquid assets such as a family business, farmland or growing assets.) Or do you have goals that decrease your risk? The more you plan to give to charity, the less you will face in estate tax.
  • Have an experienced estate planning attorney (like me!) review your plan for the starting points (credit-shelter or “AB trust”) as well as help you consider other tax savings options. Get a 2nd opinion, especially if your current attorney is not communicating with you about the looming tax changes.