Federal Estate Tax - gone or just on vacation?

Jeff Jacoby, writing in the Boston Globe, says,

"not all deaths are sad. The federal estate tax died at 12:01 A.M. on January 1, an occasion of joy if there ever was one. Allowing it to expire was one of the few sensible things Congress accomplished in 2009. Keeping it dead should be a congressional goal for 2010."

Lawyers and financial planners have become familiar with the federal tax's demise over the past 10 years; down from a tax of 55% to zero this year. However, while there is no tax in 2010, the tax comes back in full vigor in 2011 at the 55% rate on all assets over $1,000,000. We know from experience by reviewing hundreds of Wills over the past 10 years how planners had to structure estates to minimize the impact the federal levy has on families.

"Needless to say, this temporary vanishing act is wreaking havoc on estate planning, and many analysts expect lawmakers to revive the tax sometime this year, perhaps even making it retroactive to January 1. But if the goal is clarity and certainty in the tax code, a far better option would be to make the repeal permanent."

Jacoby argues for the complete abolishment of the federal tax over the whoops and hollers of the "class warriors." After all, the tax doesn't hurt the Rockefellers and the Buffets, but the family business entrepreneur.

Says Jacoby, "The estate tax is pernicious because it punishes precisely the kind of behavior society should want to reward -- work, prudence, savings -- and it rewards behavior that should be discouraged -- profligacy, overconsumption, and leisure."

What to you think?

Read the full column here.

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