The Return of the Estate Tax

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) has not been renewed by Congress and consequently the estate tax will rise to fifty-five percent next year. Even modest sized estates will now need to plan for the possibility of a significant estate tax hit at the time of death. We will need to incorporate not merely our basic revocable trust planning but also our more advanced planning strategies.

While the the estate tax related reasons for proper estate planning are certainly valid, they should not be your sole motivation. Even while the E. G. T. R. R. A. was in effect, the more successful estate planning attorneys discovered that proper estate planning was justified for reasons beyond purely tax savings.

Continued Uncertainty

And the estate tax issue will remain a top political issue into next year and beyond. From the perspective of an estate planning attorney, it would appear that there are just too many reasons in favor of perpetuating the act, compared to letting it end.

Winners, if the estate tax returns:

Firstly, those who would like to restore the estate tax are the Democrats who are fully cognizant of the advantages of increased revenues and decreased budget deficits.

Republicans, in spite of their rhetoric, also have a vested interest because politicians have learned that a campaign calling for the repeal of the estate tax would continue being an effective fundraiser. Were the estate tax to permanently sunset, the Republicans would have one less issue with which to raise revenue for their candidates.

Insurance companies will once again take their place as an effective estate planning tool and their revenues will sharply increase.

Likewise, charities will see an increased prosperity, as people again recognize that giving to charity is an effective way to lower one's estate taxes.

As for the States, they are counting on the return of the estater tax to boost dwindling revenues.

Losers, should the estate tax return: Those with a vested interest in seeing a permanent end to to the estate tax are the heirs of those people who have failed to plan.

The political posturing of the estate tax issue has changed from the early Bush years of calls to repeal the "unfair and unjust death tax" to "not giving a tax break to the very wealthy." It is unlikely that we will see bipartisan political agreement on any meaningful long-term "estate tax reform" in the near future.

This means that the uncertainty that existed during EGTRRA will continue. Fortunately, the skilled estate planning attorneys at Wild Felice & Pardo, PA are able to address these concerns and set up an estate plan that protects your beneficiaries from the estate tax and avoids probate completely.