The estate tax saga wages on in the halls of Congress as both sides seem to be engaging in more symbolic acts on the measure with little progress on reaching an agreement which might actually become law. New York estate planning lawyers appreciate the limbo this places on many local families.
For example, Politico reported late last month on changes to the Democrats proposed tax plan. The changes come, insiders say, in order to present a united Democratic front during the election season--there is still not actual consensus among Democrats on the appropriate estate tax level. The move is likely an attempt to re-focus the election debate away from estate taxes (on which there is intra-party disagreement) and toward another tax issue--whether or not to extend Bush-era tax rates or let them expire.
The main concerns over the estate tax has been explained often by estate planning attorneys. Right now estates worth more than $5.12 million face a 35% tax rate. However, if Congress does not act, next year estates over $1 million will be hit with a 55% tax rate. Disagreement reigns regarding whether to extend current rate, let them expire to old rates, or find some middle ground.
While Republicans are generally aligned in their hope of extending the lower rates or ending the tax altogether, Democrats are split. Recently, the Senate Democratic caucus issued a tax plan that rolled the estate tax rate back to its old $1 million exemption and 55% rate. Yet, over fear of Democratic defections, that proposal has been removed. The hope is that the removal will allow the party to attract a majority of votes in the body for a tax bill focused solely on the Bush era income tax rates (though still below the 60 needed for passage) in order to make a political point about the cause of the failure to act.
So what does this mean for local families? Not much.
The truth is that it is almost impossible for this issue to be resolved before the election. Agreement or compromise is next to impossible in the months leading up to a heated presidential election. But compromise is exactly what is needed for this issue to be resolved and for local families to have the stability they need to plan their long-term affairs with an accurate understanding of what the law is and will likely be in the future. No matter what, however, this situation is not at all a reason to forgo New York estate planning altogether. Accommodations can be made in the future to account for possible changes.
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