With the election of Republican Scott Brown as US Senator from Massachusetts, the entire legislative environment in Washington, DC has changed.
The Obama Administration and the Democratic Party no longer can ramrod legislation through Congress.
Compromise will be the order of the day.
Further, Democrat representatives who will be up for reelection this fall will be much more shy about supporting tax increases when our economy is still in recovery mode.
As a result, the unthinkable has happened. The one year estate tax repeal for 2010 that was enacted in 2001 is in effect, and now it appears that, if it is reinstated at all, the restoration will be prospective, not retroactive.
I used to joke that no one believed repeal would happen, but if it did I would be selling tickets for the Golden Gate Bridge. Now the situation has become serious.
There are more important things that money, but some families now face the possility of saving millions of dollars in federal estate taxes by deciding not to prolong a life in an imminent death situation this year. This decision will likely impact individuals with taxable estates over $3.5 million and married couples with taxable estates over $7 million, which lets most of us out.
Those who decide to take advantage of this “opportunity” should be sure to visit their estate planning attorney before moving forward to provide contingency language to replace “unified credit” (lifetime exclusion) and “marital deduction” language with appropriate provisions under the law for 2010, including basis adjustment allocations and how to handle carryover basis in allocations to beneficiaries.
In this scenario, fortune favors the bold.
Also, remember the federal estate tax is an elective tax. It can be avoided using bequests to qualified charities or other charitable planning.