Suite 910
Philadelphia, PA 19102
215.569.0000
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One Oxford Centre
Suite 4300
Pittsburgh, PA 15219
412.255.3767
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Sentry Office Plaza
Suite 602
216 Haddon Ave.
Westmont, NJ 08108
856.858.9499
Disclaimer
 U.S. Senate Rejects End of Estate Tax On June 12, 2002, the Senate rejected President Bush's request to make permanent the elimination of the Federal estate tax. As a result, until further action by Congress, the estate tax, which is currently scheduled to phase out over the next seven years and to be eliminated in 2010, will re-emerge in 2011 at the same rates, and with the same Exemption Equivalent, as existed in 2001. Thus, in 2011, the Exemption Equivalent, which in 2009 will reach $3,500,000, will revert to the $675,000 which was in effect when the President's tax reduction bill was passed. Although it is widely believed that Congress will act to avoid returning to the tax structure of 2001, it is reasonable to conclude that the estate tax will be with us for the foreseeable future. As a result, it remains critical that individuals with estate assets exceeding the current $1,000,000 Exemption Equivalent plan for that tax. Even couples with assets of more than $1,000,000 but less than $2,000,000 should do some tax planning to avoid the possibility that the estate of the surviving spouse will be "overfunded" and made subject to a tax which, with proper planning, might be avoided. For example, if a couple's assets total $1,500,000 but are all in joint name, on the death of the first spouse, all of those assets will pass to the ownership of the surviving spouse. Although the marital deduction would eliminate any tax on the first death, if the second spouse dies before the end of 2003 (when the Exemption Equivalent is scheduled to increase to $1.5 million), the excess over the $1,000,000 Exemption Equivalent will be subject to tax. If, by contrast, the couple's assets had been divided so that each of them had sole ownership of $500,000, with another $500,000 being in joint name, and if the will of the first spouse to die contained a credit shelter trust to be funded with $500,000, there would still be no estate tax on the estate of the first to die and, because the amount which went into the credit shelter trust would not be included in the estate of the second spouse, the taxable estate of the second spouse would be only the $1,000,000 which would be fully sheltered by the Exemption Equivalent. To keep matters in perspective, the tax rate currently in effect on estates which exceed the current $1,000,000 Exemption Equivalent starts at 41%. The tax on an estate of $1,500,000, even after application of the Unified Credit, is over $200,000. We would be pleased to work with you to assure that your current estate plan takes optimal advantage of the tax savings and tax deferral opportunities now available. Please feel free to call us to schedule a review. BACK TO INDEX |
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