Video: Tax Tips: Charitable Contributions

Article: IRS Offers Tips for Year-End Giving

Bonnie is a nurse who has worked many years in palliative care. The following are the five most common regrets people who are dying shared with her:

1.  I wish I’d had the courage to live a life true to myself and not the life others expected of me.

2.  I wish I hadn’t worked so hard.

  3.  I wish I’d had the courage to express my feelings.

  4.  I wish I had stayed in touch with my friends.

5.  I wish that I had let myself be happier.

Recently, I’ve thought quite a bit about whether clients might want to communicate this sort of message in their estate planning documents. Sometimes it seems we get caught up in the technical aspects of estate and tax planning and lose sight of key messages that we might want to express in our planning. I’m going to talk with some clients about this and see if it interests them. I’ll share what I learn.

Bonnie’s post is an insightful read. Also, Lifehacks has some good comments about what Bonnie shared. I encourage you to check them both out.

   The key provisions of the bill are:

• A $5,000,000 “portable” estate tax exemption;
• 5,000,000 gift and GST tax exemptions;
• A top 35% rate; and,
• A technical “cleanup” involving a number of questions about EGTRRA and the sunset provision.

If the house goes along, some questions come to mind:

• What happens after two years – $1,000,000 exemption and 55% top rate?
• Will the exemptions remain portable, i.e., that a surviving spouse can tack and use the unused exemption of the first spouse to die provided an estate tax return is filed on the first spouse’s death to secure the unused exemption?
• Are the gift and GST exemptions “portable?”
• What will happen to the gift tax exemption – does it stay coupled with the estate tax exemption after two years? 

We should know what is going to happen in the next few days.

The Changing Federal Estate Tax: 2001 – 2011

I encourage anyone practicing in Mississippi Chancery Court to bookmark the Judge’s blog. In the week or so that I’ve been browsing by, Judge Primeaux has made a number of posts with a good mixture of Chancery practice requirements, tips and suggestions along with real-life people stuff that is the kind of thing that keeps us grounded.

Kudos so far Judge.

I look forward to following you online.

• Establish a $3.5 million exemption,
• Tax estates valued between $3.5 and $10 million at 45%, estates between $10 million and below $50 million would be taxed at 50%, and the rate on estates exceeding $50 million would be 55%; and
• Levy a "billionaires surtax" of 10%.

The bill also incorporates the estate tax changes proposed by the Obama administration including limits on GRATs and limiting valuation discounts for closely held entities that do not own active trade or businesses. Finally, the bill contains provisions that lower the value of family farms for estate tax purposes by up to $3 million and increases the maximum exclusion or conservation easements to $2 million.

At this point, I do not know if the proposed exemption is “portable” so that a surviving spouse could use their deceased spouse’s unused exemption.

It will be interesting to see what Congress does with this new bill. I understand that Senator Sanders was opposed to some previous proposals floated by other senators including Senator John Kyl of Arizona. This bill could be an attractive "meeting point" for those who want the estate tax reset in 2011 to a  $1 million exemption and 55% rate and senators and members who want to eliminate the estate tax. I’m sure the election cycle will have tremendous influence on what happens.

Apparently the proposal includes a $3.5 million exemption that will increase to $5 million over some phase-in schedule.

How many taxpayers will choose to prepay their estate tax? I think the rate differential will have to be significant to induce taxpayer’s to prepay tax. Perhaps this will only be enticing to very large estates. Is that sort of reform “saleable” to the public – tax relief for the wealthiest?

Keep in mind that the Kyl proposal is subject to the pay-go limits and apparently Kyl’s proposal needs $80 billion in offsets to meet the pay-go requirements. Can he come up with that much in other tax increases or program cuts?

We’ll see. It’s past time for this issue to be resolved.

Jay Heflin is reporting in this piece in the Hill that there is apparently bipartisan support to allow estates of decedents dying in 2010 to select using the no estate tax/carryover basis regime of 2010 or whatever estate tax that Congress reinstates at some point this year. I heard something about this last week and just chuckled at the prospect of it becoming law. Apparently now it is an alternative being seriously considered and has some momentum.

Heflin reports that Senator Kyl of Arizona believes that he can get an estate tax bill with $5 million dollar portable exemptions and a 35% top estate tax rate passed in the Senate. Last week, acting chairman of the House Ways and Means committee, Rep. Levin, suggested that this taxpayer selection option deserves serious consideration, especially since Congress had left taxpayers in such limbo with the estate tax.

But here’s the rub: To pass Kyl’s bill, Congress has to agree on some pretty significant budget cuts and that will be hard to do. Given how deeply in debt we are right now, I still would not be surprised to see Congress do nothing and let the estate tax roll back in with 55% top rates and $1 million exemptions in 2011. Kyl says he can get the support needed to make these cuts and get his bill passed. We’ll see. Maybe that is what the Easter bunny will bring us this year.

What we heard at a planning conference this summer seems to be playing out: Because the health care reform debate has consumed Washington, the only estate tax bill that is likely this year is a one year patch; AND, since Washington was desperately in need of tax revenue, speculation was that Congress will keep the current 2011 estate tax rules in place, which, among other things, rolls the estate tax exemption back to $1 million.

We shall see.

So, it is probably a good idea to communicate with any executor with whom you are or will be working on an estate tax return to make sure you timely know about the issuance of the closing letter by the IRS.