More On Tax Planningfrom The Advisor's Professional Library
- Health Insurance: Health and Medical Savings Accounts A Health Savings Account is a trust created exclusively for the purpose of paying qualified medical expenses of an account beneficiary. Although they are popular, they are not without their pitfalls and the regulations can be complicated. Learn more about how to avoid federal taxation on the accumulation and distributions of HSA.
- Use and Misuse of Social Media Social media is an inexpensive and effective way to communicate with established and prospective clients. Nevertheless, when RIAs utilize social media to promote their advisory practices, they risk compliance problems for their firms.
The House of Representatives passed on December 3 an estate tax bill, H.R. 4154, introduced on November 19 by Rep. Earl Pomeroy (D-North Dakota), a member of the powerful House Ways and Means Committee, and 11 cosponsors.
The bill, the Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009, passed by a vote of 225-200, following the defeat of a last-ditch amendment proposed by Republicans calling for the "complete repeal of the death tax."
The bill would extend the 2009 estate tax level to 2010 and make permanent the estate tax at a $3.5 million level for an individual and $7 million level exemption for couples and impose a 45% maximum tax rate as proposed by the Obama Administration. The bill now moves to the Senate. More than one Republican lawmaker has said the bill would be dead on arrival in the Senate; Democrats said they expected it would pass Senate muster.
Congress must do something before year-end or there will be no estate tax in 2010. Advisors like Myra Salzer, president and founder of The Wealth Conservancy, aren't surprised by Pomeroy's bill. "I never expected the estate tax to go away," she says, despite Republican calls to eliminate what they call the "death tax."
Salzer notes that Pomeroy's bill "re-unifies the gift and estate exemption, making lifetime planning easier and enabling estate holders to get appreciating assets out of their estate." But Salzer cautions that the U.S. is "headed for an inflationary environment [because] the Fed will need to keep its presses running to pay off our ever-increasing debt; plus, if the value of the dollar continues to fall, imports will become more expensive."
As such, Salzer explains, "the [Pomeroy] bill should have some sort of incremental CPI provision to keep up with inflation, but I didn't notice any such provision. In essence, that omission is a subtle way of insuring constantly increasing estate/gift taxation."