The Estate Tax Law: A Look Into The Future
I make two predictions. 1.
Irvine Blackman, Brian I. Whitlock
I make two predictions.
1. The estate tax will not be repealed in 2003. (The Republican Senate could join the House and the president to do it, but they won’t. It’s too dangerous, politically.)
2. If Republicans kill the estate tax, then the next time Democrats get control in Washington, it will be reincarnated (as it has been three times before). It would take 60 votes (not the usual 51) for the Senate to kill the estate tax. Don’t bet on it.
A better bet is that the $1 million unified credit (the first $1 million of an estate escapes tax) will be raised. The exact single amount or multiple amounts (larger unified credits will be phased in) are a guessing game. The outcome of the change will be driven, as George F. Wills puts it, by “knowns, unknowns and unknown unknowns.”
For planning—disposition of wealth, business succession and asset protection—there is a clear road. Steve Leimberg says it perfectly:“Our task as professionals—regardless of the current or even future outcome of this battle—should be to make clients aware of the urgency and significance of action, even if there is NO estate tax!”
What should you do? If the estate tax were to die, you would still have to:
- Plan for retirement
- Transfer your business to the business kids (free of income and capital gains tax if you do it right
- Treat the non-business kids fairly
- Protect your wealth from creditors, lawsuits and in-laws
- Create tax-free wealth for yourself and heirs. The list goes on. If your plan ignores estate tax (because it is gone), it is likely that when the next “unknown” hits Washington, you will have a new estate tax law to deal with.
My advice is to plan as if the estate tax is and will be around for your life and the lives of your kids and grandkids. Then (whether there is or is not an estate tax) when you go the big business in the sky, you and your family will win. If there is an estate tax, a proper plan ensures that not even $1 of your wealth will be lost to the IRS estate tax.