NAIFA supports meaningful, sustainable estate tax reform that provides certainty for clients to do their planning and take action. The new proposal imposes a 35 percent tax rate on estates over $5 million. It is unclear as to the reunification of the estate tax and the gift tax exemptions. It also is unclear as to what special elections if any will be available to estates resulting from deaths in 2010 in terms of dealing with a carryover basis system versus a stepped up basis system.
The agreement between the President and Congressional leaders on multiple tax issues including estate taxes has been announced to last two years. The temporary nature of the agreement raises questions whether the estate tax proposal is sustainable. The “cost” in lost tax revenue of that level of exemption and tax rate is estimated at $20- to $30 billion over the next two years and above 2009 exemption and tax rates, which were at $3.5 million exemption and 45 percent tax rate.
Details about the estate tax proposal—as well as other components of the deal—are lacking. And, as is well known in Washington, the devil is in the details.