Saturday, March 5, 2011

Obama's New Estate Tax Proposal

With the ink barely dry on the recent federal estate tax legislation that set the federal estate tax exemption at $5 million per person through December 31, 2012, President Obama's recently proposed budget includes a proposal to return the federal estate tax exemption to its 2009 level of $3.5 million per person effective January 1, 2013.  The President's proposal would also include the current "portability" provision that permits the allocation of any unused estate tax exemption upon a first spouse's death to be "added to" the surviving spouse's exemption upon the death of the surviving spouse.  If approved, the new rules would place some limits on the use of valuation discounts and GRATS that are commonly used in planning for clients with larger estates.

At first glance I think this plan is a good start.  It would allow the vast majority of estates pass without being subject to a federal estate tax, while bringing in some revenue from the wealthiest American families to help reduce the budget deficit. Of course none of that will help unless Congress and the President are able to rein-in the entitlement programs (e.g. Medicaid, Medicare, Social Security).

Click here for more detail about the President's proposal.

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