Why the Estate Tax Exclusion Seems Destined to Remain at $3.5 Million Dollars

Although there are at least three sets of proposals currently being proposed by either the House, the Senate or the Treasury Department, the aspects which these proposals have in common indicate one thing. Congress seems very likely to cement the $3.5 Million applicable exclusion amount by making it permanent.

The House bill is H.R. 436,entitled the Certain Estate Tax Relief Act of 2009 was introduced January 9, 2009. Notably it would eliminate the sunset provision of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)and make permanent 2009's $3.5 million annual exclusion amount. Additionally, it would set the highest marginal tax rate at 45% with a five percent (5%) surcharge for Estates over $10 million.

The Senate Bill is S.B. 722, entitled the Taxpayer Certainty and Relief Act of 2009, was introduced March 26, 2009. Section 301 would make permanent the 2009 $3.5 million applicable exclusion amount and provide an adjustment for inflation.

The Obama Administration has also issued a proposal in the form of the "Treasury Department's General Explanations of the Administration's Fiscal Year 2010 Proposals."This document essentially containing all the administration's tax proposals,and also known as the "Green Book" was released on May 11, 2009. In this document the administration proposed to make this years $3.5 million applicable exclusion amount permanent.

Although there are some significant difference between these three proposals in other areas of exclusion portability, family entity valuation discounts, and term restrictions on Grantor Retained Annuity Trusts ( GRAT) they all propose to cement the $3.5 million per spouse applicable exclusion amount. So it seems that this will most likely be the appropriate figure for the near to midterm.

However, given the huge fiscal deficits and the changing nature of the world's monetary system the federal government may soon need to raise revenue wherever it can. And since such a tiny percentage of Americans will leave an estate anywhere near the ballpark of 7 million dollars, it is possible and perhaps likely that this level may be reduced in future years. One other possibility is that if we experience hyper-inflation and the applicable exclusion amount isn't indexed for inflation, that many more people will leave an estate coming close to or exceeding $3.5 million.

Links to text of proposals:

* H.R. 436
* S.B. 722

ABOUT THE LAW OFFICES OF CHRISTOPHER R. TWINING
Christopher R. Twining, Attorney at Law, based in the Westwood Neighborhood of Los Angeles is an innovative estate planning, probate & trust administration, and elder law attorney, who offers in home services for busy and movement challenged clients. The Law Office of Christopher R. Twining serves the cities of Los Angeles, Santa Monica, Culver City, Beverly Hills, West Hollywood, Pasadena, Burbank and the neighborhoods of West Los Angeles, Westwood, Brentwood, Bel-Air, Pacific Palisades, Palms, Pico-Robertson and Encino. Dedicated to helping individuals and couples prepare comprehensive estate plans according to their wishes; he offers them these services at an affordable price, in the relaxed comfort of their homes.

CHRISTOPHER R. TWINING
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