Estate Planning, Probate & Elder Law Attorneys

» 5 Things You Need to Know About the Estate Tax in 2010: #4 (State Death Taxes)

Short post today, both because I've covered this issue fairly recently and because I'm dealing with a burst pipe in my basement.

The fact that there is currently no federal estate tax does NOT mean there are no estate taxes on the state level. The chart in this article is a must-see -- it lists all of the states with an estate or inheritance tax (or both), along with exemption amounts and rates.

» 5 Things You Need to Know About the Estate Tax in 2010: Introduction

I'm going to be starting a series of posts entitled "5 Things You Need to Know About the Estate Tax in 2010." The first post should be up tomorrow, but before that, I need to vent.

I've put off writing about this because (1) I get angry just thinking about it and (2) I was hoping against hope that something would be changed by the end of 2009 (it wasn't, obviously). So here we are.

There's an idea being floated by some political commentators that Congress is "broken" because it can't pass health care reform. I don't buy that, but of course I, as a conservative, stand athwart history (and athwart expensive, invasive and probably unconstitutional legislation that can never be repealed) yelling "stop." Health care reform is a huge, (overly-)complicated deal, and it SHOULD be difficult to make huge changes to the way our nation works.

The estate tax, on the other hand? I got nothing. In June of 2001, major changes were enacted to the way in which the federal estate tax operates. Because of a so-called "sunset provision," these changes make no sense:

2002-2009: estate tax exemption increases, estate tax rates fall

2010: no estate tax

2011: estate tax exemption and rates back to what they would have been in 2001

What in the world? I know -- it's ridiculous. But here's the thing: we've KNOWN about this ridiculous result ever since June of 2001. And nobody in Congress has done anything to fix it. So here we are, with a ridiculous, unworkable estate tax law and rampant uncertainty about whether it will ever be fixed.

OK, that's enough ranting -- in this series of posts I'll be discussing things like:

-How carry-over basis works

-Could Congress impose an estate tax for 2010 retroactively?

-How estate tax repeal affects Family Trust and Marital Trust planning

-The state estate tax problem

-Planning for 2011 and on

» 5 Things You Need to Know About the Estate Tax in 2010: #2 (Retroactivity)

Perhaps I am getting ahead of myself -- I have been assuming that we will not have a federal estate tax for 2010. It's possible that Congress might get its act together and actually pass an estate tax bill in 2010 that applies for both 2010 and the future. This is what I've always thought would happen (naive me) -- maybe permanently setting the exemption at $3.5 million.

But this raises the question of what happens with individuals who die in 2010 before the new law, reinstating the estate tax, passes. Could such a law be made retroactive?

Probably. The Supreme Court previously stated (in Carlton v. United States, 512 U.S. 24 (1994)) that a retroactive law is valid under the Constitution if (1) the government shows that the statute has a rational legislative purpose and is not arbitrary and irrational; and (2) the period of retroactivity is "modest." (In Carlton, the "modest" period of retroactivity was 14 months.)

That being said, there is some caselaw indicating that the result might be different if the Supreme Court views this law (estate tax reboot? estate tax 2.0?) as a "wholly new" tax or as simply fixing something in an existing tax (the Carlton case mentioned above involved closing an estate tax loophole).

You may want to take a look at this article on Gideon Alpert's excellent Gay Couples Law Blog for a bit more information on this topic.

» Charles Schwab's Barnaby Grist leaving for new Lightyear brokerage business
 

» Take Your Startup Viral
These entrepreneurs grew their businesses by teaching others the tricks of their trade. You can, too.