Estate Tax Phase-Out Set to Expire in 2011
3/11/2010

Summary:

Stoel Rives attorney Kirstin Humann discussed in the Puget Sound Business Journal the implications of a possible restoration of the estate tax at 2001 levels. The tax on inheritance had been gradually phased out under a bill passed by Congress in 2001. However, the bill contained a sunset clause set to go into effect on January 1, 2011. In the absence of further Congressional action, the federal tax will automatically revert to a $1 million exemption level per person with a rate of up to 55 percent. In 2009, the exemption was $3.5 million, or $7 million for married couples.

"Back in 2001, I don't think anyone would have predicted in 2010 Congress would not have taken action yet," said Humann. The $1 million exemption "leaves middle America at this day and age, with planning that perhaps wouldn't have to be done if Congress had taken action." Humann noted that if an inheritor lacks sufficient liquid assets, there could be a risk that some or all of an inherited family business must be sold to pay the tax. However, she added, there are many legal methods to avoid or significantly limit the amount of tax that must be paid, such as shelter trusts.

"Planning Peril" was published by Puget Sound Business Journal, February 19-25, 2010.