Re-emergence of Estate Tax in 2011
Anyone whose estate is valued at more than $1m might wishfully contemplate dying this year. That is if they intend to leave property to their heirs. Because on 1 January 2011, the federal estate tax is scheduled to re-emerge with a vengeance and impose a 55% levy.
From 2001 – 2009, an increasingly valuable exclusion amount rose from $675,000 and a maximum tax rate of 55% to $3.5m and 45%. In 2010 the estate tax was repealed. Next year it may be adjusted to a $1m exemption amount and 55% top rate if Congress does nothing.
So beginning next year, families whose property values and retirement plans (and other assets too) have risen to over $1m will be vulnerable to the estate tax.
Meanwhile wealthy persons who died this year and so escaped the estate tax include George Steinbrenner, New York Yankees owner, whose estate has been estimated at $1.1 billion. The federal estate tax in 2009 was 45 percent, with the $3.5 million per-person exemption. If Steinbrenner had died last year, his estate could have been taxed almost $500 million. But not in 2010. Undoubtedly the beneficiaries of the estates of Lynn Redgrave, Art Linkletter, Dennis Hopper, J D Salinger, Lena Horne, Jean Simmons and other members of the rich and famous club are also comforted that Uncle Sam was not among the heirs of these decedents in 2010.
The Obama Administration would like to see the estate tax return to 2009 level. But Republicans blocked this proposal. More recently Senators Jon Kyl and Blanche Lincoln re-introduced legislation that exempts $5m from estate taxes with a 35% maximum tax rate. The problem with Congress passing a lenient bill is that the US Government needs the money. And though politicians may say little about raising taxes, privately they must surely be whispering in the quiet corridors of power: ‘show us the money!’