Estate Planning
by digby
I just don’t know what to say about this:
Starting Jan. 1, the estate tax — which can erase nearly half of a wealthy person’s estate — goes away for a year. For families facing end-of-life decisions in the immediate future, the change is making one of life’s most trying episodes only more complex.
On Jan. 1, the one-year halt to the estate tax begins. And never before has so much money hinged on the time of death, WSJ’s Laura Saunders reports in a News Hub extra.
“I have two clients on life support, and the families are struggling with whether to continue heroic measures for a few more days,” says Joshua Rubenstein, a lawyer with Katten Muchin Rosenman LLP in New York. “Do they want to live for the rest of their lives having made serious medical decisions based on estate-tax law?”
Currently, the tax applies to about 5,500 taxpayers a year. So, on average, at least 15 people die every day whose estates would benefit from the the tax’s lapse.
The macabre situation stems from 2001, when Congress raised estate-tax exemptions, culminating with the tax’s disappearance next year. However, due to budget constraints, lawmakers didn’t make the change permanent. So the estate tax is due to come back to life in 2011 — at a higher rate and lower exemption.
To make it easier on their heirs, some clients are putting provisions into their health-care proxies allowing whoever makes end-of-life medical decisions to consider changes in estate-tax law. “We have done this at least a dozen times, and have gotten more calls recently,” says Andrew Katzenstein, a lawyer with Proskauer Rose LLP in Los Angeles.
Of course, plenty of taxpayers themselves are eager to live to see the new year. One wealthy, terminally ill real-estate entrepreneur has told his doctors he is determined to live until the law changes.
“Whenever he wakes up,” says his lawyer, “He says: ‘What day is it? Is it Jan. 1 yet?'”
Estate-tax experts didn’t expect Congress to allow the tax to lapse, and are flabbergasted that it is actually happening. “All fall when I gave speeches, I said I was willing to bet anyone in the room $10 that we would have an estate-tax extension by the end of the year,” says Thomas Ochsenschlager, head of taxes for the American Institute of CPAs. “Thank goodness I didn’t have any takers,” he says.
Nobody thought they’d actually let this happen. But I would bet that unless they can reinstate the tax immediately, the right will begin a hysterical campaign to keep the tax permanently zero so that these family death panels can’t spend the next year killing off old people. When that doesn’t happen, the Democrats will be accused of instituting a mega tax hike farmers.
They should have just extended last years rates one more year and then let the original tax rate come back up to where it was before Bush passed his epic giveaway to the wealthy. That’s what fiscally responsible liberals would do. This is not an aristocracy and there’s no reason for people to expect to inherit vast sums without having to pay a hefty tax. But instead this could be a circus that results in lowering the estate tax even further than it had to be because of it.
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