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Burlington, VT office 802.540.0529
Hanover, NH office 603.643.6072
Rutland, VT office 802.773.3822
Woodstock, VT office 802.457.9492

July 26, 2010 Newsletter Archive

What 2011 Will Bring

By this time we all have heard about George Steinbrenner's death on July 13. Steinbrenner was not the first ultra wealthy person to die in 2010, but he may be the most well known. Forbes magazine estimates Steinbrenner's net worth was over $1.15 billion. With 2010 also being remembered by some as the year without an estate tax, Steinbrenner's death could save his heirs about half a billion in estate taxes.

However, the future of the estate tax is again in flux. In 2011 the estate tax and the generation-skipping tax comes back and only the first $1 million of an estate would be exempt from estate taxes. Assets above the exemption would be hit with a 55% federal penalty. We have already experienced a Congress which did nothing to extend the 2009 tax leading us to this estate tax free year. It may be unlikely that Congress will act to make changes to the $1 million estate tax free amount.

Multitudes of families will be impacted by the $1 million exemption. A home, coupled with some investment assets and a retirement account could easily exceed $1 million. Over the years, ultra wealthy families have applied a number of strategies to reduce the value of their estates and reduce their estate's tax exposure. Some of these strategies include life gifting, taking advantage of an annual gift tax exclusion of $13,000 per year, and charitable giving. However, such strategies are not readily available to those families who, while comfortable, hold their assets in less liquid form (their home, for example) or retirement accounts. Additionally, a common fear among those who are living on passive income is that they will need most of their assets in their late life. Accordingly, giving and gifting is less of an option for these individuals.

The Obama administration had talked of keeping the 2009 estate tax levels in place for 2010 and beyond, which would revive the $3.5 million exemption and a 45% rate on assets that exceed that amount. Very recently, Senators Jon Kyl, R.-Ariz., and Blanch Lincoln, D-Ark., re-introduced legislation that would exempt up to $5 million from estate taxes and impose a 35% tax rate on assets that exceed that amount. The bi-partisan collaboration is heartening, but unfortunately, many analysts have commented that such a political hot potato in an election year is unlikely to result in the law changing. Doing nothing is also a fairly simple way for Congress to raise revenue. Accordingly, many see us reverting to the $1 million exemption and the 55% rate in 2011.

While initially it was thought that Congress would attempt to reinstate an estate tax retroactively, the further we are into the calendar year, the more unlikely we are to see such attempts. Additionally, with the billionaire families who would be most impacted by retroactivity in the fight against it, retroactivity potentially looks less prudent and beneficial for Congress now.

Although it is beneficial to have more substantive answers, we are preparing our clients to consider their estate planning in light of the reversion to the $1 million exemption amount and 55% tax rate. We seek to review plans and have further discussion with you as 2011 looms near. If you have questions about what a reinstated estate tax exemption means for you please call us now.

Source: http://www.usatoday.com/money/perfi/taxes/2010-07-21-estatetax21_CV_N.htm


The Well Lived Life
Maybe we are Only as Old as We Feel?

I recently had the pleasure of going to see Jimmy Cliff at Suicide Six Ski Area. This outdoor venue afforded us a fairly intimate setting to see one of the few legends of reggae music still alive. And alive he was. At 62 Cliff exuded the enthusiasm of a man half his age, singing and dancing effortlessly. The "boomer" crowd was on its feet throughout his concert, but I know that Cliff mesmerized me with his passion and energy. Maybe I don't go to enough concerts anymore, but I was really struck that Jimmy Cliff, whose music I've relished since my late teens, still had it. And by "it" I mean energy, enthusiasm, and almost a spiritual presence on stage. The day after the concert I posted about having attended the event on my facebook page, mainly for my high school and college friends to comment on, and comment they did. The usual suspects — people who I spent my formative years going to concerts with — shared my enthusiasm that Jimmy Cliff really still had it. I was pleased. Does this mean we will all have his energy at age 62, or older? Who knows? It's clear that Jimmy Cliff is in great shape and has kept his vocals, as well as his life enthusiasm up. My lesson from Cliff however, is that, to the extent possible, living well can be done. Where we can maintain a positive outlook, and keep ourselves relatively fit, we probably do have a good chance of rocking and rolling for years to come.

Melendy Moritz PLLC is a client centered boutique firm. We focus on your unique needs by providing the individualized legal counseling and advising tailored to your specific situation.

We concentrate on the planning that matters to you.
Call us at 603.643.6072 or 802.457.9492


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