Possible Estate Tax Portability
Estate planning was complex, even before EGTRRA. With EGTRRA, planning became even more complicated due in good part to the graduated increase in the estate tax exemption. With each year of EGTRRA the estate tax become more uncertain, due to the default system of repeal in 2010 and sunset in 2011, and the ubiquitous assumption that Congress would not allow repeal and sunset legislation to see the light of day. Surely, virtually everyone thought, Congress would stabilize the estate tax, which would have been welcome even in the eleventh hour of 2009.
Instead, on January 1, 2010, instant and dramatic change was added to the already challenging landscape of estate planning. On the last day of 2009, we had estate tax and generation-skipping tax (“GST”); and beginning with the first moment of 2010, estate tax and GST were repealed, or more accurately, suspended, until, like the phoenix, they are to rise from their own ashes in 2011.
With so much momentous legislative change that affects estate planning occurring literally, overnight, it is not surprising that estate planners have not given much attention to the possible portability of the estate tax exemption. This article suggests that thinking about portability is worthwhile, even though portability was not a part of the estate tax system in 2009, nor is portability included in the sunset regime scheduled to take place in 2011.
The reason to give our clients a “heads up” is that the Senate Finance Committee (“SFC”) has expressed a strong interest in portability. The SFC requested a presentation on portability at its third hearing on estate tax reform in April of 2008. Further, portability is included in a number of House bills, and, importantly, in a prominent Senate bill introduced in 2009 by Max Baucus, Chair of the SFC. Even if portability does not survive the upcoming political Armageddon over the estate tax, a future Congress may find room for it. Our clients may appreciate prior notice that portability is on the horizon.