Not So Permanent

As I have previously discussed, President Obama has released his proposed budget proposal, and he seeks to revisit the unified credit. Under the President proposed budget, the unified credit would be reduced to this 2009 level of $3.5 million, and the estate tax rate would be set at 45%. Furthermore, President Obama would like to place a cap on the amount that individuals can invest in IRAs and Roth IRAs. It would also require beneficiaries to begin distributions from the IRA within 5 years. Additionally, Obama’s proposal would affect several tools, like grantor trusts, that estate planning attorneys have traditionally used to take advantage of the unified credit.

However, some estate planning attorneys argue that altering these commonly used methods will not generate as much revenue as President Obama hopes it will produce because if people will probably not use that technique any more and instead look to use other tools. For example, some “people may look instead to save in traditional investment accounts where long-term capital gains are taxed at lower rates than ordinary income.”

See Bloomberg, Surprise! Obama Revisits Estate Tax Exemption, Investment News, Apr. 11, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.