Too Rich to Live?
The estate tax is set to come roaring back in January. That sets the stage for a perverse calculus: End it all—or leave a massive bill for your heirs to deal with.
By LAURA SAUNDERS And MARY PILON
WSJ
It has come to this: Congress, quite by accident, is incentivizing death.
When the Senate allowed the estate tax to lapse at the end of last year, it encouraged wealthy people near death's door to stay alive until Jan. 1 so they could spare their heirs a 45% tax hit.
Now the situation has reversed: If Congress doesn't change the law soon—and many experts think it won't—the estate tax will come roaring back in 2011.
Not only will the top rate jump to 55%, but the exemption will shrink from $3.5 million per individual in 2009 to just $1 million in 2011, potentially affecting eight times as many taxpayers.
The math is ugly: On a $5 million estate, the tax consequence of dying a minute after midnight on Jan. 1, 2011 rather than two minutes earlier could be more than $2 million; on a $15 million estate, the difference could be about $8 million.
Of course, there is a "death incentive" whenever Congress raises the estate tax. But it hasn't happened in decades; the top rate has held steady or fallen since 1942, according to tax historian Joseph Thorndike of Tax Analysts, a nonprofit group. In fact, the jump from zero to 55% would be "the largest increase in a major tax that we've ever seen," Mr. Thorndike says.
That possibility presents a bizarre menu of options for wealthy older people—and their heirs. Estate planning was never cheerful, but now it is getting downright macabre, at least for the tax averse.
By LAURA SAUNDERS And MARY PILON
WSJ
It has come to this: Congress, quite by accident, is incentivizing death.
When the Senate allowed the estate tax to lapse at the end of last year, it encouraged wealthy people near death's door to stay alive until Jan. 1 so they could spare their heirs a 45% tax hit.
Now the situation has reversed: If Congress doesn't change the law soon—and many experts think it won't—the estate tax will come roaring back in 2011.
Not only will the top rate jump to 55%, but the exemption will shrink from $3.5 million per individual in 2009 to just $1 million in 2011, potentially affecting eight times as many taxpayers.
The math is ugly: On a $5 million estate, the tax consequence of dying a minute after midnight on Jan. 1, 2011 rather than two minutes earlier could be more than $2 million; on a $15 million estate, the difference could be about $8 million.
Of course, there is a "death incentive" whenever Congress raises the estate tax. But it hasn't happened in decades; the top rate has held steady or fallen since 1942, according to tax historian Joseph Thorndike of Tax Analysts, a nonprofit group. In fact, the jump from zero to 55% would be "the largest increase in a major tax that we've ever seen," Mr. Thorndike says.
That possibility presents a bizarre menu of options for wealthy older people—and their heirs. Estate planning was never cheerful, but now it is getting downright macabre, at least for the tax averse.
(More here.)
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2 Comments:
It's great
Why does it seem that we never hear Congress talk about the Estate Tax until it's election season ... then it's the Death Tax ... as John Kline campaign has just sent out a letter warning his supporters :
"This macabre tax was eradicated this year, but next year it will return to confiscate up to 55 percent of a deceased person’s assets over $1 million. The Death Tax would result in the demise of small businesses shortly after the demise of their owners when the inheritors are forced to sell the business to pay the tax."
Why didn't Mr. Kline acknowledge that he voted against H.R. 4154 Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009. The legislation would “Amends the Internal Revenue Code to establish a permanent $3.5 million exclusion amount and a maximum tax rate of 45% for decedents dying, and gifts made, after December 31, 2009.”
I will guess two reasons why he voted NO.
#1. He thinks it should be maintained at zero ... which thus far has given tax relief to 25,000 estates valued at over $3.5million ... thus the national debt continues to grow.
#2. So he could campaign on it.
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