US Estate Tax Set To Rise From The Dead In 2011

by Mike Godfrey, Tax-News.com, Washington

25 July 2001

Despite the Bush Administration's claim to have repealed estate taxes, many are not so sure that they've gone for good. Estate taxes are based on the value of a person's assets at the time of their death, and under the recent tax bill approved by Congress, are set to be gradually phased out over the next nine years, and eliminated in 2010. However, as the provisions of the new law no longer apply after 2010, what might happen after then is anyone's guess.

'Some in Congress have claimed to have repealed the estate tax,' said Bruno Graziano, senior estate tax analyst with CCH Inc., a US tax law publisher which recently released a report on the subject. ' More precisely, however, the new law repeals the estate tax for one year- 2010.'

After 2010, unless Congress rules to extend the provisions of the tax law, estate taxes could reappear at rates established under the previous law. While some are confident that the estate tax is dead and buried permanently, and that no-one will vote to re-establish it, others are fearful that changing political circumstances over the forthcoming years may mean that when Congress looks again at the issue, it may do so with an entirely different political emphasis.

Those in the estate planning industry are confused by the implications of the new measures, which have necessitated a complete re-examination of traditional wisdom. 'Not only will many estate plans have to be re-examined and re-written, but some of the basic principles that have guided estate planning will be stood on their heads,' warned Graziano. There are also fears that when the estate tax is repealed in 2010, heirs may be hit with punitive rates of capital gains tax, whereas under previous legislation, they would have been taxed on a 'stepped up' basis on inherited assets.

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