Glenn Bailey, CPA

The New Year commencing January 1, 2010 brought the repeal of Federal estate and generation skipping transfer taxes, while retaining transfers on gifts with the highest gift tax rate of 35%.  This dawn of the post estate tax era, which was created through legislation enacted in 2001, led some to conclude the best planning for certain taxpayers was to pass on during the one year window of 2010 and escape estate taxation.  Absent corrective legislation, estate and generation skipping transfer taxes will emerge again beginning in the 2011 year at pre-2001 tax rates and exemption levels.

While planning for death is a difficult subject for all, only the most abject avoiders of tax would seek death as a way out of transfer taxation.  While the Congress has been focused on many other priorities, most observers have believed the estate and generation skipping transfer tax laws in effect during 2009 would be extended.   Yesterday, Senate Finance Committee Chairman Max Baucus and Treasury Secretary Tim Geithner indicated support for legislation that would freeze 2009 rates and exemptions into the year 2010 and beyond, retroactive to January 1, 2010.

We envision more debate on estate and generation skipping transfer taxation, and tweaking of certain provisions that Congress finds abusive during this Congress.  Politics aside, there is ever more demand for revenue and extension of the 2009 law seems a relatively easy fix politically.

Stay tuned, as will we.  Particularly as this election cycle draws near, more emphasis will be placed on the tax laws with potentially significant income tax changes for 2011.

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