However the elections shake out, congress and the new president will be dealing with the estate tax issue over the next year. Already a myriad of options have been thrown into the hopper. Amost no one and none of the proposals point to the elimination of the federal estate tax.
The good news in all of this as I have discussed in previous posts is that in the past 10 years the law will have evolved from the estate battering $600,000 exemption that ruined the life’s work of so many hard working people. Where that evolution ends remains to be seen, but there is little doubt that it will be a far fairer treatment than where we started.
Here is a list of the current ideas floating about DC.
- Â HR 1929 and S 1994 introduced by the Salazar brothers of Colorado would exclude farms from estate taxes as long as the farms remain farms. This is my home state and personally I think these two need to recognize that only about 1% of those impacted by estate taxes are farmers and ranchers. Unfortunately for the rest of us they both wear cowboy hats and they can’t seem to see beyond that.
- HR 3170 comes from democrat Harry Mitchell of Arizona. It would raise the combined exclusion to $5mm from the 2009 limit of $3,5mm over a six year period.
- HR 3475 from democrat Michael Capuano of Massachusetts would increase the exclusion to $5mm in 2010. No phase in period.
- HR 4235 from democrat Nita Lowey of New York would change the exemption to $3mm immediately, bypassing the increasing to $3.5mm in 2009.
- HR 4042 from democrat Gerald McNerney of California would increase the exemption a year early to $3.5mm and establishes 45% as the maximum estate tax rate.
- HR 4172 from democrat Dennis Moore of Kansas again increases the exemption to $3.5mm a year early and indexes the exemption amount for inflation after that.
- HR 4242 from democrat Earl Pomeroy of North Dakota make the exemption $3mm for 2007 and 2008, $3.5mm for 2009 and beyond. It freezes the maximum tax at 47% for taxable amounts in excess of $2mm.
It seems to me there are a lot of very good options being considered. Obviously none of it will happen before the elections, but, with the exception of my two cowboy legislators from Colorado, all of the proposals are huge improvements over where we were 10 years ago. My personal opinion is that indexing for inflation will fix the problem for the future.
Will there still be a need for survivorship or second to die life insurance? I think it will still play a pivotal role, but most of these proposals would eliminate smaller estates from needing that kindof protection.
Bottom line. 2009 will be an interesting year. I personally am very optimistic and hopeful about the changes in estate tax law and I think the direction of the country in general.