As Congress delays action on extending the 2001-03 tax cuts, state revenue officers may be secretly hoping for continued legislative paralysis. Why? Because the federal estate tax, repealed for this year, will be back in January —and many states are in line for a windfall if the levy returns to its pre-2001 form. It’s not [...]

The one-year lapse of the federal estate tax this year came with the unwelcome requirement that heirs assume their benefactors’ bases for some assets they inherit in 2010, as Howard Gleckman explained in a recent TaxVox post. For some mid-sized estates, that meant higher taxes. But Howard touched only briefly on the burden the new [...]

No joke: The other day a financial planner told me about a client who asked if he could rework his father’s end-of-life advance directive to take into account the ever-changing estate tax. In other words, could he pull the plug on the old man if it looked like he was going to die before January [...]

When President Obama proposed to cap the value of itemized deductions at 28 percent, the philanthropic sector came out foursquare against the idea, claiming that it would decimate charitable contributions. Cutting the tax savings from gifts to charities for high-income taxpayers would raise the after-tax cost of giving and lead people to give less. For taxpayers in the 35 percent top tax bracket, the cost of giving away a dollar would jump 10 percent from 65 cents to 72 cents (ignoring any state tax savings). That would lead to perhaps a 2 percent drop in giving—about $9 billion. (Len Burman explained the math in TaxVox last year.)

I came of age as a Royals fan, and I agree with George Brett’s comments at his Hall of Fame induction ceremony, “I don’t like those Yankees still”. George Steinbrenner’s Yankees tortured my beloved Royals in the late 1970s and early 1980s. I’ll never forget my dad flipping across news channels so my family could watch Brett tear out of the dugout over and over after umpires nullified his home run because Steinbrenner’s Yankees objected to the amount of pine tar on his bat. Ridiculous.

News reports suggest that the Senate may soon consider restoring the estate tax with an option allowing people to prepay their tax before they die. Details are apparently still in flux as senators negotiate. We—and maybe they–don’t know yet what they’ll propose for the basic estate tax but it’s unlikely to be harsher than the 2009 version.

If you’re single, not in great health, and are worth a lot but not a really huge lot, you could do your heirs a favor and die today or tomorrow. Sure, you may want to hang around to ring in the New Year but that could cost the beneficiaries of your will a chunk of change.

Let’s face it, from a tax policy perspective, 2009 was a bust. Except for creating a bunch of new credits in the name of economic stimulus, Washington pretty much ignored the revenue code. 2010 will be very different. Facing trillions of dollars of expiring Bush-era tax cuts, President Obama and Congress will be forced to make some critical decisions in the new year.

Thanks to Senate gridlock, taxpayers engaged in estate planning will suffer whiplash over coming months as the federal estate tax disappears and reappears, possibly unexpectedly and retroactively.
When the Senate refused to act Wednesday, it opened the door for the estate tax to disappear in two weeks–although no one knows for how long. Not only will the tax end, but the gift tax rate will fall to 35 percent. And, hardly noticed by most, only some assets inherited in 2010 will get “step-up” in basis.

It is almost 2010, and Congress is scrambling to figure out what it is going to do about the estate tax.
In some perverse way, it’s fun to watch lawmakers dive into a mess largely of their own making. But as you do, don’t be distracted by the argument over the size of estates that should be excluded from tax, or whether the rules are extended for one year or two. The real argument is over the rate. That’s where the bucks are.