Estate Taxes for 2011

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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Webfoot
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Estate Taxes for 2011

Post by Webfoot » Sat Oct 30, 2010 10:12 am

Whats the status?

If nothing is done... does it go back to $1m per person before tax and then a staggering 55% tax?

Any hope for something better?

kenbrumy
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Post by kenbrumy » Sat Oct 30, 2010 10:25 am

Nobody knows. Without action, the estate tax deduction will go to $1MM but the step up upon death will also go back to "unlimited."

I tried a similar post about what income taxes are changing to next year and it got blocked for being "political." Apparently, wondering how much money the government is confiscating from us after doing and not doing numerous things somehow came across as political. :roll:

I've decided there's no way to really predict what the dysfunctional mess we're depending on to create our tax code will finish early enough for me to plan for what contribution rate I want to make to my SERP plan. If something isn't done soon, the withholdings will be very high and require companies to recalculate things later in 2011 if/when tax rates and deductions change. As of today, there is also no AMT patch. That will be fun for many people if it doesn't get done. [political comment removed by Mod]

If you know anyone with a sizable estate, encourage them to die this year especially if you are an heir. :lol:
Last edited by kenbrumy on Sat Oct 30, 2010 10:27 am, edited 1 time in total.

sscritic
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Re: Estate Taxes for 2011

Post by sscritic » Sat Oct 30, 2010 10:26 am

Webfoot wrote: If nothing is done... does it go back to $1m per person before tax and then a staggering 55% tax?
Yes. Congress is not in session. The law that exists today, which had various tax brackets and rates changing according to a specific schedule over the last 10 years, will cause brackets and rates to change yet again for the last time (under this law) on January 1, 2011.
wikipedia wrote:Congress has passed tax laws that have made numerous, temporary changes to both the estate tax rate and the exemption amount. ...

on January 1, 2011 the estate tax is scheduled to return at a top rate of 55% and the exemption amount is scheduled to drop back down to $1.0 million.

Jack
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Re: Estate Taxes for 2011

Post by Jack » Sat Oct 30, 2010 7:43 pm

Webfoot wrote:If nothing is done... does it go back to $1m per person before tax and then a staggering 55% tax?

Any hope for something better?
The nation survived just fine for nearly half a century with an estate tax of 70% up until 1981. It then survived another 20 years with an estate tax of 55%. I doubt anything terrible will happen if the rates revert to their 2001 levels as planned, although if you are really worried about it you still have two months to take advantage of the discount.

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steve roy
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Post by steve roy » Sat Oct 30, 2010 8:51 pm

Remember. All the oncoming tax increases were voted on and signed into law 8-9 years ago.

It's not like people couldn't see this coming.

FedGuy
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Post by FedGuy » Sat Oct 30, 2010 9:58 pm

kenbrumy wrote:[political comment removed by Mod]
Wow. Given what was left in, I can't imagine how bad something would have had to have been to warrant being taken out.

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NAVigator
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Re: Estate Taxes for 2011

Post by NAVigator » Sat Oct 30, 2010 10:30 pm

Jack wrote:
Webfoot wrote:If nothing is done... does it go back to $1m per person before tax and then a staggering 55% tax?

Any hope for something better?
The nation survived just fine for nearly half a century with an estate tax of 70% up until 1981. It then survived another 20 years with an estate tax of 55%. I doubt anything terrible will happen if the rates revert to their 2001 levels as planned, although if you are really worried about it you still have two months to take advantage of the discount.
What a crass way of looking at this situation. Many of us are in a position where it is important to manage our estate and leave it to our heirs in a tax efficient way. Having this huge uncertainty has made planning very difficult. To trivialize it is a disservice for those that struggle with this issue.

It is not a matter of the nation surviving, but how the individual deals with it.

Jerry
"I was born with nothing and I have most of it left."

etarini
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Post by etarini » Sun Oct 31, 2010 10:09 am

Are you sure you'd rather inherit this year?

One thing not often mentioned is that, as the law currently stands, there is also no step-up basis this year - you inherit the decedent's cost basis on everything. An executor may allocate up to 1.3 million to offset this, in what's called "modified carry-over."

Of course, if there *is* no executor to do this, as might be the case if there's a living trust with, say, co-trustees who are also the only beneficiaries, then you can't avoid inheriting the cost basis. One could imagine that the original cost basis could be quite low on assets that were held for a long time.

Eric

JDCPAEsq
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Post by JDCPAEsq » Sun Oct 31, 2010 10:24 am

etarini wrote:Of course, if there *is* no executor to do this, as might be the case if there's a living trust with, say, co-trustees who are also the only beneficiaries, then you can't avoid inheriting the cost basis. One could imagine that the original cost basis could be quite low on assets that were held for a long time.

Eric
Eric - That is inaccurate to say the stepup would be lost if there was no executor. Any election such as this has always been available to a trustee or other person in charge of the decedent's assets. The election can certainly be made by the trustee of a revocable trust. Your theory, if it was correct, would cause quite a scramble among estate planners who have prepared millions of revocable trusts.
John

sscritic
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Re: Estate Taxes for 2011

Post by sscritic » Sun Oct 31, 2010 10:25 am

NAVigator wrote:Many of us are in a position where it is important to manage our estate and leave it to our heirs in a tax efficient way. Having this huge uncertainty has made planning very difficult.
The current law was set 10 years ago to change almost every year up until 2011; we have had certainty but not stability for the last 10 years. The current law has both certainty and stability starting January 1, 2011 with no further changes built into the law. Planning is much easier with stability rather than uncertainty as you admit. Under current law, the rates next year will be what they were when they were set 10 years ago. There hasn't been any change in the 2011 estate tax during those 10 years, so you have had lots of time to plan.

The problem with any law, whether income tax, immigration, or estate tax, is that Congress can change it. Imagine that you are an illegal immigrant trying to plan not knowing what Congress will do: Dream Act?, comprehensive reform?, greater penalties for hiring illegals?, etc. For planning purposes, it would be easiest if the world were stuck in 1965 and never changed, but that's not the way things work.

the intruder
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Re: Estate Taxes for 2011

Post by the intruder » Sun Oct 31, 2010 5:11 pm

Webfoot wrote:Whats the status?

If nothing is done... does it go back to $1m per person before tax and then a staggering 55% tax?

Any hope for something better?
1. When Congress returns from recess on Nov 15 we will know who will control the the House and Senate in January. It is more llikely than not that no changes will be enacted before year end if the House of reps changes control for the reasons in the next paragraph.

2. The Party that controls the House in the 112th Congress gets the exclusive right to introduce tax legislation. The minority party is shut out of being able to make amendments or stop the passage of legisialtion under House rules. The Senate will make amendments to the House passed legislation to add additional tax breaks but will not reject it because time is of the essance.

3. If the current minority party in the House becomes the majority party in January I will let you all decide whether is more likely than not that all of the current income tax provisions will continue in 2011. As for the status of the estate tax if the House changes hands next Tuesday remember the House voted last year to continue the 2009 estate tax laws rules for 2010 and beyond. The Senate is still considering even more favorable provisions.

Geraldson
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Re: Estate Taxes for 2011

Post by Geraldson » Sun Oct 31, 2010 6:00 pm

sscritic wrote:
NAVigator wrote:Many of us are in a position where it is important to m. There hasn't been any change in the 2011 estate tax during those 10 years, so you have had lots of time to plan.
.
Very self righteous and one of those posts with "tone" referred to in another thread. YES, the tax RATE cuts were set to sunset after 10 years. But everyone understood that the whole business of tax rates would need to be reviewed. So there was NO stability assumed or "lots of time to plan"

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abuss368
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Post by abuss368 » Sun Oct 31, 2010 9:22 pm

As of now, without further action from Congress & the Administration, the tax cuts of 2001 and 2003 are set to expire at the end of the year.

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