Latest Chatter on the Bush Tax Cuts (As They Relate to the Federal Estate Tax Exemption)
I attended the 32nd Annual Duke Estate Planning Conference at the Duke Law School in Durham, North Carolina on October 14 -15, 2010. One of the speakers gave an opinion on what is likely to happen with the Bush Tax Cuts this year after the election ----- ABSOLUTELY NOTHING!!!
REASON ----- if the Republicans pick up enough seats, then they will not agree to anything in December, since they may be able get a better deal in 2011, with more Republicans in Congress. Sounds logical, since Republicans and the Democrats still have differing views on taxation.
So what will happen in 2011? It is likely that we will enter 2011 with a $1,000,000 exemption from estate taxes, rather than the current situation where there is no tax, or the hoped for $3,500,000 minimum with portability so that if one spouse did not use his or her exemption, then the survivor is able to combine it with his or her own exemption for a total exemption of $7,000,000.
The thought is that the exemption will be increased in 2011, but it is not clear if they will retroactively fix it. This means that some people could end up being taxed and some may not.
It sounds illogical, but so has the past 10 years when Congress missed opportunity after opportunity to fix the problem. I hope that the speaker is wrong and there is some fix in December, but I fear that he may be right.
There was also a belief expressed that relates to state estate taxes. Many states are not pushing their elected officials in Washington for reform of the estate taxes. The reason is that if we go back to the law prior to the Bush tax cuts, then many states, including South Carolina, will pick up the state death tax credit, which they lost with the Bush tax cuts. This could help with their budget deficits.
Supposedly the state push is somewhat subtle. It is more in the form of not expressing any concern to their elected officials in Washington over estate taxes, rather than affirmatively opposing reform. Again, I hope the speaker is wrong, but I fear that he may be right.
--Stay tuned for more updates!