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Long Island's Elder Law, Special Needs & Estate Planning Firm

Thursday, June 22, 2006

Estate Tax Changes may be Slipped into Pension Legislation

Republican lawmakers, who so far have been unable to win Senate approval of either full estate tax repeal or a significant reduction in the tax that wealthy heirs pay, are now considering another tactic: slipping estate tax "reform" into a pension bill now in a House-Senate conference committee.
The pension legislation, H.R. 2830, which seeks to put the nation's defined benefit pension plans on a sounder footing, is being finalized by a conference committee reconciling different House and Senate versions.
The "primary advocate" for attaching estate tax reform to the pension bill, according to the National Underwriter, an insurance industry publication, is Sen. Trent Lott (R-MS). Lott said he doubts that a deal on reducing the estate tax can emerge in the Senate, and so is viewing the pension bill conference report as an alternative vehicle.
“Conference reports are not amendable, and this would be a circuitous way to move estate tax reform forward without providing opportunity for consideration of alternatives on the Senate floor,” said David Stertzer, chief executive of the Association for Advanced Life Underwriting.
But such a last-minute inclusion of estate tax provisions could doom the contentious pension bill, which has taken months to hammer out. "Adding additional controversial issues to the package could kill the chances for enactment this year,” said Kenneth Cohen, senior vice president and deputy general counsel of the Massachusetts Mutual Life Insurance Company.
The latest Republican compromise proposal on the estate tax would exempt any individual estate under $5 million from the tax ($10 million for couples) and would lower the tax rate to a sliding scale starting at 15 percent and rising to 30 percent for estates over $30 million. These changes would cost the U.S. Treasury about 80 percent as much as full repeal, or about $800 billion over the first ten years in which its budgetary effects would be fully felt, according to the Center on Budget and Policy Priorities.

Source: elderlawanswers.com

Thursday, June 8, 2006

Senate Gearing Up for Estate Tax Repeal Vote

Senate Republicans are preparing to revive the debate over permanent repeal of the estate tax on June 6, but the real action will be on the Democratic side.

Republicans concede they lack the votes for full repeal, but they are hoping they can work out a compromise that would persuade enough Democrats to exempt the families of many wealthy individuals from paying federal estate tax. Sens. John Kyl (R-AZ) and Max Baucus (D-MT), who is the senior Democrat on the Senate Finance Committee, are reportedly negotiating.

Kyl is proposing increasing the estate tax exemption to $5 million and reducing the top estate tax rate to 15 percent from its current 46 percent.

Currently, only estates worth more than $2 million are taxed by the federal government. The threshold is scheduled to rise to $3.5 million in 2009. For the year 2010, estates will be entirely free from federal taxation. However, the law that includes this provision expires at the end of 2010. Thus, unless Congress acts in the interim, the estate tax exemption will then revert to $1 million.

Baucus is under pressure from fellow Democrats who say that even a compromise would deplete federal revenue by hundreds of billions of dollars and make it more difficult to shore up social programs and balance the budget. According to the Center on Budget and Policy Priorities, reducing the top rate to 15 percent would lose nearly as much revenue as full repeal, which will cost the U.S. Treasury an estimated $1 trillion. The Republicans need Baucus to deliver about a half-dozen Democrats to reach the 60 votes required to overcome any filibuster.

Almost all Democrats support raising the exemption threshold for eligibility to $3.5 million for an individual and $7 million for a couple.

Meanwhile, House Democrats have released a report detailing the effect that a repeal of the tax would have on the estates of oil company executives and members of the Bush cabinet. According to the report, estate tax repeal would save the estate of Vice President Cheney between $13 million and $61 million, and would save the estate of Defense Secretary Donald Rumsfeld between $32 million and $101 million. The family of retired ExxonMobil chief Lee R. Raymond would receive a $164 million windfall.