Friday, February 5, 2010

Estate Tax Woes

Today's Smart Answers column discusses a problem most of us will never have: The estate tax.

Turns out that a distracted and ineffectual Congress last year failed to pass a "fix" to a quirky, one-year suspension of the estate tax in 2010. Neither side wants to be the one to bring back the "death tax."

Big surprise, right?

The result of this neglect is a pretty outrageous inequality. If your rich uncle died on Dec. 31, 2009, any money he left in his estate over $3.5 million would have been taxed. The highest rate is 45%.

If, however, Uncle Moneybags hung on until Jan. 1, 2010, you and his other heirs get all that money - sans imposition of an estate tax.

To take the outrage even farther, if dear uncle languishes all this year and finally departs on Jan. 1, 2011, any money he leaves you over $1 million will again be taxed.

This crazy situation has spawned dozens of macabre "don't pull the plug on granny" and "watch your back this December" jokes, according to the financial planner I interviewed for the column. His withering criticism of Congress was unusual, but I think the gridlock frustration has frayed the last nerve of even the most magnanimous professionals.

For an interesting way to alleviate gridlock, check out Question Time, a movement to encourage regular give-and-take sessions between Congress and the White House.

2 comments:

  1. Lucky me. I don't have to worry about this. Yet.

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  2. Yes. As my dad used to say, putting on his best Yiddish accent, "I should have that problem!"

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