$4B Question: Will Congress Renew the 2009 Estate Tax Exemption and Apply it Retroactively?
Posted by Janet Brewer on Mon, Aug 23, 2010 @ 09:13 AM
In March, 2010, oil tycoon Dan Duncan died leaving an estate valued at approximately $9 billion. Had Mr. Duncan died three months earlier, his heirs would have been required to pay over half his estate to the U.S. government in the form of estate taxes.
Lapse of 2009 Estate Tax Exemption
Due to a loop hole in the law, the estate tax exemption lapsed on January 1, 2010. In 2009, the estate tax exemption was $3.5 million per person ($7 million per couple) with an assessment rate of 45%. There has been speculation that Congress may renew the 2009 estate tax exemption and assessment rate and apply it retroactively to January 1, 2010. However, a retroactive estate tax seems less and less likely with each passing day as Congress focuses on other issues such as, healthcare reform, the Gulf oil spill, and financial reform. So, it seems that the heirs of the wealthy who die in 2010 will retain billions of dollars rather than being required to pay those monies to the government in the form of estate taxes.
What Happens in 2011?
The estate tax automatically reboots on January 1, 2011 at the exemption rate of $1 million per person ($2 million per couple) and an assessment rate of 55% (maximum). So, while 2010 will be the most lucrative year for the heirs of wealthy decedents, 2011 will be the most expensive.
What about Capital Gains Taxes?
If Dan Duncan’s heirs or the heirs of any other wealthy decedents sell assets they inherited, they will be required to pay capital gains tax on the profit – the difference between the original cost of the asset and its market value when sold. As of the writing of this article, federal capital gains tax is capped at 15%.
Getting Legal Help
It’s important to strategically plan and build flexibility into your estate plan in order to maximize asset protection and minimize exposure to tax liability. A knowledgeable and experienced estate planning attorney can assist you in formulating an estate plan that will accomplish these goals while best serving your individual needs and the needs of your heirs and beneficiaries.
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Learn more
The right move now can save you money in 2011 and beyond. Download our free Year-End Asset Protection Update for Bay Area Families to learn about options to consider before Dec. 31st.
All the best,
