Ways and Means Chair comments on future of estate tax
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The new chair of the House Ways and Means Committee, Rep. Sander Levin (D-Mich.) was quoted in an April 19 article on DailyFinance.com:
Levin indicated he wants to change the current estate tax law. In 2010, the estate tax expired, but under current law in 2011 it will revert to 2000 levels, when estates worth more than $1 million were liable for the federal tax. In 2009, estates below $3.5 million were not liable for estate tax.
“I find this uncertainty unacceptable and unfair,” Levin said. Many wills are written to leave as much to the children as possible below the threshold at which estate taxes must be paid, with the rest going to the surviving spouse. “Today that means that the children may well be left with nothing,” he said.
The article doesn’t contain any further information about what Levin has in mind, but I assume that he is thinking about bringing the estate tax back with a $3.5 million exemption, retroactive to January 1, 2010. However, as previous blog entries discuss, the IRS undoubtedly faces litigation if the estate tax is retroactively reinstated.
Also, Levin’s comment about the way “[m]any wills are written” is not particularly accurate. Most wills (and living trusts) that contain estate tax savings provisions contain a family/credit shelter/bypass trust that receives the amount exempt from estate taxes. This allows the surviving spouse to utilize the funds for support for the remainder of his or her life. At the survivor’s death the trust is paid to the children. Furthermore, in most marriages, the surviving spouse will leave the assets to the kids at his or her death, so they won’t exactly be left with nothing. What he describes is primarily a problem in second marriages.
What I take from Levin’s statements is that the estate tax issue will not be resolved in the near future, anyway.
