Estate Planning, Probate & Elder Law Attorneys

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Q: Dear Rick: I'm preparing my 2009 tax return. The instructions state in order to deduct charitable contributions you must make the contribution in that calendar year.

» 5 Things You Need to Know About the Estate Tax in 2010: #5 (2011 and on)

So where do we go from here? It's hard to know. If we're going to think in terms of what might happen, then we have to consider the following three possibilities:

#1: No action by Congress (no federal estate tax in 2010, but federal estate tax automatically comes back with a $1 million exemption in 2011 and thereafter);

#2: Prospective action by Congress (federal estate tax re-enacted for 2011 and thereafter -- and maybe for the rest of 2010 as well); and

#3: Retroactive action by Congress (so federal estate tax applies in all cases, even for 2010 -- obviously there's the retroactivity problem here).

If I had to guess, I'd say that #2 seems like the best possibility (maybe I should, but I'm not even including total repeal as a possibility). But even if that's the case, we have no idea what the re-enacted federal estate tax will look like. Will the exemption amount be $3.5 million? Or higher? Or lower?

The big question is, should any of this cause you to take action with respect to your documents right now? And my answer -- which I hate to give -- is, "I don't know." In a perfect world, you wait a month or so, we get some clarity on the estate tax, and then you have your documents updated. But what if that clarity doesn't come in a month or so (or ever)? Or what if you die during this period of uncertainty? Ultimately, I think everyone has to make the call on their own, depending on their situation and risk tolerance. The shameful part is that the very rich can afford to change their documents now, and then change them again and again. Can anyone else afford to do that?

» 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

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