Tuesday, May 11, 2010

In 2011, Estate tax could come back with a vengeance: watch your politicians!

Linda Stern has an important article on the May 2010 AARP Bulletin, “Estate tax is dead, but confusion lives on; Law’s expiration can complete unpleasant surprises for heirs”, April 14, 2010, link (web url) here.

The federal estate tax lapsed on Dec 31, 2009, having been in effect since 1916; but it will come back in 2011, and with previous high estate tax levels unless Congress acts. The article describes the politicking in some detail, but fortunately for many families, there doesn’t seem to be a lot of interest in increasing the estate tax again.

Here's another article (more detailed and more technical), from SeniorLaw, "2010: is the federal estate tax really repealed for only one year", by Michael S. Kutzin. Goldfarb Abrandt Salzman & Kutzin LLP, link here. Notice that the "step up in basis" rules change of Congress does not act, and no repeal of federal gift tax in 2010.

What I recall from my dealings with the far Left in the early 1970s (especially Doctor Spock’s “People’s Party of New Jersey) was an incredible political or social indignation that saw all inherited wealth as immoral. On the other hand, Ayn Rand used to argue that “unworthy” people will squander wealth anyway, whereas the able and well-meaning will do good things with it for everyone out of “enlightened self interest.”

In fact, inheritances (both spousal and for older adult children) are an important way we pay for future eldercare needs, in practice. It’s going to be a long time before long term care insurance can cut in to the exploding eldercare bill.

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