Estate Tax Update: don’t get too comfortable with current levels of estate tax…

May 13, 2015 - Posted by: admin - In category:

taxes - No Responses

…at least not if President Obama and his administration have their way.  As part of the latest 2014 budget proposal, the Obama administration is seeking to turn back to clock to 2009 regarding the maximum amount of assets permitted to pass free of estate tax, gift tax and GST.  There are many important aspects to this proposal, including the fact that it would not take effect, if passed, until 2018. (By the way, that is an interesting idea for a President–institute legislation which will take effect ONLY after you are lone gone…:). The current proposal does not call for any retroactive effect, i.e. no “claw back” provisions. Finally, this is just a proposal and seemingly set to become subject to much debate and Capital Hill wrangling before it ever sees the light of day.  Still, it is important to know what is being discussed.

Estate tax, gift tax and GST (generation skipping transfer tax) are not currently on the radar or otherwise applicable to most people’s estates (whether planned or otherwise).  However, proposals such as this have the potential to build momentum and possibly bring such “nasty” words and concepts as “death tax” (estate tax) back into play for many more Americans.  Said another way, even though the word on the streets is that the current thresholds for death tax (also known as the applicable exclusion amount, among other names) is “permanently” set, though still adjusted each year for inflation, there is nothing that prevents Congress from changing the law at any time.  Congress does not have the Constitutional ability or authorization to pass a law of any kind which is then “set in stone”.  Thankfully, our marvelous Constitution provides this significant safety measure and protection. This means that even if we get some really bad laws from a current session of Congress, we always have the hope that the next session of Congress will get their heads on straight and amend or repeal the bad laws which were previously instituted.  (insert here, perhaps, a commentary about Obamacare…).

In summary, you should NOT listen to the word “permanent” as it relates to the current applicable exclusion amount and assume that death tax and other estate planning considerations related to these things are never going to be relevant to you, your family and/or your property.  Just because such things are not applicable today, given the relationship between your property and the current tax law threshold, there is nothing which prevents a change of laws tomorrow in a manner that could make estate tax and other tax issues VERY relevant for you, your family and your assets.

This is nothing that should cause you to lose sleep. Rather, just be sure to visit with your local estate planning attorney every 2 or 3 years to ensure that your estate plan remains fully compliant with applicable state and federal laws (tax and otherwise). A regular dental checkup, a regular medical checkup, a regular visit to your local mechanic and a regular visit with your estate planning attorney–do those things and you should be in good shape.  You can then sleep better at night.

Updated October 6, 2016


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