Arizona Probate Attorney

Estate And Gift Taxes: What's Next?

The political and economic climate in our country has changed substantially in the past 9 months. Many clients are wondering how these changes will affect their current estate plan and estate and gift tax liability. The answer to these questions should be answered in the very near future.

The 2001 Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) is in its final stages. Without changes to the existing law, the estate taxes will be repealed on January 1, 2010 and then EGTRRA is set to “sunset” on January 1, 2011, when the current estate and gift tax exemptions are scheduled to revert back to pre-EGTRRA rules. This sunset, if it’s allowed to happen, will significantly raise the estate tax rates and reduce the estate tax exemptions, effectively restricting the amount of assets that can be passed to your loved ones without paying estate taxes.

It has been well documented recently in the media that President Obama plans to keep the estate tax and will block the estate tax from going away in 2010. President Obama has also proposed to keep the estate tax exemption at its current 2009 rates of 3.5 million dollars per U.S. citizen or $7.0 per couple. Given our current political and economic climate if this proposal is signed into law, many will regard these permanent changes a tremendous victory. To the affluent, blocking the anticipated repeal of the estate tax in 2010 will be seen as a major defeat.

Regardless of what changes to the estate tax laws emerges in the next few months we know that our country is facing touch economic times. Our country’s deficit is escalating to record levels, we are still funding the war on terrorism and we expending huge sums of money for the various government bailouts, all resulting in the fact that it will be politically difficult if not impossible to achieve an estate tax exemption larger than the proposed retention of our current 2009 rates.

Although President Obama’s proposal is not ideal for many Americans, it sure beats the alternative of returning to the Clinton-era tax levels of a 1.0 million dollar exemption and a 55% top tax rate.

Changes are coming. Be sure to keep up to date with the changes to the estate and gift taxes as they are passed into law by contacting your estate planning attorney or tax advisor.

Kenneth C. Barney is a partner with the law firm and practices in the areas of wills, trusts, probate administration, trust administration, and other family based estate planning needs you may have. If you have any questions any other legal issues, please do not hesitate to call (480) 833-1113.