What's Cooking with the Estate Tax

Senators in Washington are stirring the pot about what to do about the federal estate tax, but as NASDAQ reports, no consensus is near. Options in play:

• Do nothing - The federal estate tax return in 2011 with a $1 million per person exemption and a 55% rate.  Sen. Casey (D. PA) commented "I think it would be a big mistake when everyone's yelling about spending and deficits to let a lot of very wealthy people get off the hook,"

• Obama Administration Proposal - Permanently fix the estate tax with a $3.5 million exemption and a 45% tax.  This would mimic the tax in place for deaths in 2009.  This would be a tax cut as the revenue from the 2011 tax law change is already in the budget, and the tax loss dollars would need to be replaced by other taxes.

• Lincoln-Kyl Proposal - Starts with the Obama administrations proposal in 2011 but then "gradually phase down to a 35% rate and a $5 million exemption level."  Note that one of the ways the estate tax reduction would be paid for is by eliminating the deduction of state estate tax paid, which would significantly increase the total tax due on deaths of New Jersey residents.

What is clear is that nobody involved with the discussions are currently having to deal with the uncertainties all of this has created in helping the actual taxpayers who wish to put a plan into place, or who have suffered deaths of family members in 2010.

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Deirdre R. Wheatley-Liss is a shareholder of the Law Firm of Fein, Such, Kahn & Shepard, P.C., with offices in Parsippany and Toms River, New Jersey. She concentrates her practice in the areas of Elder Law, Estate Planning and Administration, Business Planning and Tax Law. Deirdre's individual clients range from their 20's to their 80's and beyond, while her business clients range from start-ups with exciting new ideas to 100+ year old business ventures. Clients seek Deirdre's advice and assistance with a variety of planning issues relating to identifying and meeting their personal, family and business goals, whether in a planning or crises situation.