It will be interesting to see if the New Admin shoots this one down. This is a good deal if it passes. As long as you are of the belief that what you might inherit should not be taxed and given back to the government.
HILLBERG NEWSLETTER
INCOME TAX, ACCOUNTING, CONSULTING AND BUSINESS ADVISORY SERVICES
APRIL 2009
BUSINESS VALUATIONS
William Behrens, CPA ABV
Bill Introduced Makes Major Changes to the Federal Estate Tax
Representative Earl Pomeroy introduced HR 436 which would retain the federal estate exemption at $3,500,000. The bill would allow us to continue to step up basis to the fair market value at date of death or alternative valuation date. In addition the bill would lower the maximum tax rate applicable to estates over $3.5 million but under $10 million to 45% and would set the tax rate at 50% for estates between $10 million and $23.5 million. However, the bill would eliminate a major planning tool available through the formation of limited liability partnerships. These are designed to allow the application of discounts for lack of marketability and discounts for lack of control. Under existing law, in 2011 the federal estate exemption is set to reduce to $1,000,000. This new law will allow the vast majority of estates to escape taxation all together since a married couple, through proper planning, can effectively escape estate tax on estates with a value under $7,000,000.
More specifically this bill targets valuation discounts for certain transfers of nonbusiness assets. Nonbusiness assets are any asset which is not used in the active conduct of 1 or more trades or businesses. Included within nonbusiness assets are passive assets. There is an exception for certain passive assets (such as working capital used in trade or business), for inventory, for accounts receivable, hedges and real estate (assuming material participation) that is used in a trade or business. So, basically this means ownership interests in an entity is a passive asset not subject to the exceptions listed above and therefore not subject to valuation discounts.
Bottom line is if your total assets are under $3.5 million you are fully protected from estate tax by passage of this legislation. If you are married and have an estate value of between $3.5 to $7.0 million, a relatively simple trust can eliminate estate taxes.
HILLBERG NEWSLETTER
INCOME TAX, ACCOUNTING, CONSULTING AND BUSINESS ADVISORY SERVICES
APRIL 2009
BUSINESS VALUATIONS
William Behrens, CPA ABV
Bill Introduced Makes Major Changes to the Federal Estate Tax
Representative Earl Pomeroy introduced HR 436 which would retain the federal estate exemption at $3,500,000. The bill would allow us to continue to step up basis to the fair market value at date of death or alternative valuation date. In addition the bill would lower the maximum tax rate applicable to estates over $3.5 million but under $10 million to 45% and would set the tax rate at 50% for estates between $10 million and $23.5 million. However, the bill would eliminate a major planning tool available through the formation of limited liability partnerships. These are designed to allow the application of discounts for lack of marketability and discounts for lack of control. Under existing law, in 2011 the federal estate exemption is set to reduce to $1,000,000. This new law will allow the vast majority of estates to escape taxation all together since a married couple, through proper planning, can effectively escape estate tax on estates with a value under $7,000,000.
More specifically this bill targets valuation discounts for certain transfers of nonbusiness assets. Nonbusiness assets are any asset which is not used in the active conduct of 1 or more trades or businesses. Included within nonbusiness assets are passive assets. There is an exception for certain passive assets (such as working capital used in trade or business), for inventory, for accounts receivable, hedges and real estate (assuming material participation) that is used in a trade or business. So, basically this means ownership interests in an entity is a passive asset not subject to the exceptions listed above and therefore not subject to valuation discounts.
Bottom line is if your total assets are under $3.5 million you are fully protected from estate tax by passage of this legislation. If you are married and have an estate value of between $3.5 to $7.0 million, a relatively simple trust can eliminate estate taxes.
