Estate Taxes: Where Do We Go From Here?

This is the question addressed by Richard T. Hurt, Jeffrey M. Gad, Drew LaGrande, and Megan Costa Devault  in a paper you’ll find posted in PDF form at JD Supra legal intelligence web site. The authors write for Akerman Senterfit, a law firm with expertise and focus in middle market M&A.  Here’s the way things stand now:

For the past several years, the federal estate tax law has provided elevated exemptions and lower tax rates. The key provisions of the current federal estate tax law, which sunsets on December 31, 2012, are as follows:

• $5.12 million gift and estate tax exemption indexed for inflation.

• $5.12 million Generation Skipping Transfer (“GST”) tax exemption indexed for inflation.

• 35% maximum, estate, gift and GST tax rates.

• For decedent’s dying in 2011 and 2012, a surviving spouse may use the most recent deceased spouse’s unused exemption amount (“portability”).

If no new legislation is enacted prior to December 31, 2012, then the estate, gift and GST tax exemptions revert back to $1 million, with maximum taxable rates of up to 60%.

The authors make their case that the pending law will hurt small business owners, farmers, and ranchers; result in job losses, punish prudent investors, pile further burdens on those in bereavement, and effectively results in double taxation.

The authors add that if the current plan isn’t repealed there is a real risk of claw back:  In other words, there is a risk that if permissible gifts of up to $5 million are made prior to December 31, 2012, those gifts themselves might be targeted for taxation come 2013.

Gifts Made This Year Could Be Subject to Claw Back in 2013, Claim the Authors Of a Piece a Pending Estate Law