A Second Look At Inheritance Tax Alterations
Mar 18, 2011 / By: Charles B. Pyke Jr., Estate Planning Attorney / Category: Estate Planning, TaxesWhen you are involved in a situation that is going to cost you a lot of money and the other party “holds all the cards,” as it were, any time the price comes down you are going to be somewhat grateful. For example, suppose your car broke down out in the country and a truck passed by, stopped, and offered to tow you to a repair shop ten miles away for $600 dollars. This is an exorbitant price, but you may be forced to pay it. So when the only other towing guy in the area pulls up and offers to do it for $350 you are grateful for the “break,” yet you know that you are being taken advantage of because you have no other options.
The recent changes to the estate tax are similar to the above scenario. The tax was scheduled to revert back to the 55% rate that was in place in 2001 upon the “sunset” of the Bush tax cuts as 2010 became 2011. First of all, how in the world can you ask someone to pay a tax that takes more than it leaves to its rightful owners? This is bizarre.So the passage of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reduced this anticipated 55% rate down to 35%, and that is certainly a step in the right direction, but it is a baby step nonetheless. From 2007 through 2009 (the tax was repealed for 2010) the rate of the estate tax was 45% so in a real sense the reduction was 10% from what it had been most recently.A 35% federal levy on the taxable portion of your estate is still enough to cut your legacy in half over two generations. This erosion can continue until nothing is left other than the exempt portion.Clearly, this is not the definition of “tax relief,” and it is not trite to suggest that this draconian obstacle that has been placed in the way of multi-generational success flies in the face of the American Dream.
Pyke & Associates, P.C. is a member of the American Academy of Estate Planning Attorneys.



