Estate Taxes

By Mike Barnett
There’s never been a better time to die. As in this year, if your assets total $1 million or more.

Checking in your Book of Life one day early—Dec. 31, 2010 instead of Jan. 1, 2011—could mean a 55 percent discount on the fine your non-spousal heirs will pay.

The good news is—unless the law is changed—no estate taxes will be due if you die this year (talk about a mixed blessing). That’s because the Bush estate tax reforms expired on Jan. 1. The bad news is the estate tax reverts back to pre-Bush levels on Jan. 1, 2011.

Practically speaking, that means that next year estates over $1 million (for a non-spousal heir) will be taxed at rates of 37 to 55 percent. A million bucks doesn’t buy near what it used to. With the lower exemption level, farmers and ranchers who thought they were estate tax safe will find the cost of dying in 2011 to be extreme.

Even at the lower level, 37 percent of $1 million is $370,000. How many heirs would be able to continue farming and ranching without selling off assets…land, for example… to pay death taxes? Not many.

Of course, lawmakers could still step in as the House did in early December ’09. The House passed legislation that would make a $3.5 million per exemption permanent with a top rate of 45 percent. The Senate just passed the debate all together.

What are the chances of something happening this year? Who knows? The Democrats and Republicans can’t seem to agree on anything. Intraparty squabbling on both sides of the aisle is rampant. It’s hard to think much will be done in D.C. with politics continuing as usual.

So as it stands now, your lucky heirs hit the jackpot if your card expires this year. Make it through Dec. 31, though, and tell them to kiss your assets goodbye.

Mike Barnett

Director of Publications
Texas Farm Bureau
I’m a firm believer that farmers and ranchers will continue to meet the needs of a growing world population by employing equal measures of common sense, conservation and technology.
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3 Responses to “There’s never been a better time to die”

  1. Steve Pringle says:

    While there are a lot of things that "need killing" in Washington DC. The time has come for us to be able to pass something. We are desparate for an opportunity to address the Estate Tax. While the tax has been abolished for 2010. It comes back with a vengance in 2011. We must find a way to get this done, which means getting Republicans to vote for something that the Democrats want. Until that happens we can just be satisfied with "killing everything".

  2. We all want to kill the Death Tax/Estate Tax. Unfortunately, the current political climate will not allow that. We can be stubborn and wait for for the political climate to reach that level of cooperation – but don’t hold your breath. If you did, the estate tax could kick in for YOU. I think it’s far better to take the substantial exemptions now under consideration – $3.5 million.

    Steve is 100% right.

  3. Mike Barnett says:

    Estate taxes are an unpleasant reality that most people don’t want to think about. And that is a mistake. If Congress doesn’t act this year to fix the problem of the million buck exemption level, the heirs of land rich and cash strapped farmers and ranchers will find huge tax bills awaiting when the taxman comes. This is an issue Congress needs to address.

    Mike

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