For those of you who haven’t been following this stuff, Federal tax law as currently written provides for an inheritance tax on decedent’s estates that exceed $3.5 mil. Currently if you die with a net worth over that amount, your estate (actually your heirs) will be taxed at a 45% rate on the excess value.
That is scheduled to change January 1, 2010. For one year only, the inheritance tax is scheduled to go away for decedents dying between January 1, 2010 and December 31, 2010. After that, the “death tax” as it’s fondly referred to, is scheduled to return with a smaller exemption amount of $1mil in 2011 and a higher tax rate of 55%. This has given rise to some speculation that there may be an increase in accidental deaths of wealthy seniors beginning next year! The word is that many oldsters have been drafting plans to disappear on extended vacations and otherwise avoid contact with relatives for about a year. Sort of like what deer do during hunting season.
But before you start planning scuba and sky diving lessons for Grandma, be forewarned that the House is scheduled to reevaluate this issue starting next week. The Senate should follow shortly. There are good reasons both pro and con as to whether or not we should tax estates, but I think the easy explanation is that our leaders do not want to appear as if they are trying to cut a tax break for the wealthy and their heirs. I expect that they will extend the current rules for at least a year, possibly indefinitely.
Heaven forbid somebody should pass away and escape taxation as a last act of defiance…