The ABA Tax Section Asks Congress to Give the Federal Estate and GST Taxes Prompt Attention

This week the ABA Section of Taxation wrote a letter to Congress emphasizing the importance of addressing the unusual status of the federal estate and generation-skipping transfer taxes in 2010 and 2011.

The letter addresses the effect that this issue has on estate planning: Planning has either stopped because nobody knows what to do, or it has continued as some frantically try to cover every contingency. 

The letter provides four examples of the current dilemmas:. 

• Executors are not sure how to distribute the estate of someone dying in 2010 because retroactive changes may be passed or distributions formulas rely on tax concepts not in effect.
• Drafting for every future tax contingency leads to elaborate and wasteful drafting.
• Retroactive tax changes may lead to years of litigation, leaving estates in limbo during that time.
• Making a gift in 2010 is difficult without knowing if a retroactive generation-skipping transfer tax will be passed.

The letter also highlights other tax issues, such as the uncertain basis treatment of property received from a decedent dying in 2010 and then sold after 2010 when the current carryover basis rules no longer apply.

See Stuart M. Lewis (Chair, ABA Section of Taxation), Letter to Congress Re: Reform of Federal Wealth Transfer Tax, Apr. 5, 2010; See also Hani Sarji, Letter by ABA Section of Taxation asks Congress to restore clarity to the federal estate and generation-skipping transfer taxes, Future of the Federal Estate Tax, Apr. 7, 2010.

Special thanks to Hani Sarji (LL.M in Tax candidate at New York Law School) for bringing this to my attention.