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Question:


Is there any new information about the estate tax rates for 2010?
-T. Sampson


Answer:


This issue has caused no end of consternation this year for people undergoing very trying circumstances. The estate tax, imposed on the value of assets transferred to the heirs of someone who has died, expired at the end of 2009 under a compromise made in Congress nearly a decade go. It is scheduled to resume in 2011 with a higher rate than in 2009 (55 percent instead of 45 percent) and a much smaller exemption before the tax takes effect ($1 million of an estate will escape tax instead of $3.5 million).
 
It might seem as though heirs of people who die in 2010 are getting a financial break with the estate tax being given the year off, but other changes in the congressional compromise, regarding the way capital gains in an estate are treated, mean that the tax liability may be greater this year on smaller estates than on larger ones. Just to add to the confusion and anxiety, it has been hinted all year that an estate tax might be enacted and applied retroactively for 2010. But 2010 is drawing to a close, and it seems highly unlikely that an estate tax will pass at this point. Better still, with congressional elections approaching, the Obama administration has indicated that it is considering allowing heirs of people who die this year to pick the tax regimen most favorable to them – the one for 2010 with no estate tax or the one for 2009 with an estate tax but with less onerous treatment of capital gains.
 
No decision has been announced yet, but it seems there are three certainties we all face: death, taxes and politics.
-Conrad de Aenlle



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