Fortunately, Election Day is over until next year and Americans and the new Congress can start re-focusing on what matters, getting this country back on track financially, (although this Westchester attorney wonders if that will happen in her lifetime). We have a GOP House and a Democratic Senate, with a President who doesn’t know how to make friends across the aisle; so, personally, I think we’re stuck for two years.
What many of the new officials need to realize is that come January 1, 2011, Americans are going to be slammed with taxes like never before and over the next few weeks I will highlight a few in an effort to prepare the average Joe and Jane. These include higher income taxes, fewer health savings account deductions and small business deductions and today’s hot topic – the death tax.
This year, anyone who died was able to pass their entire estate free of federal taxes to anyone. Whether you were Yankee owner George Steinbrenner, who’s net worth was said to be $1.1 billion, or George Doe with only $10,000 in the bank, Uncle Sam didn’t get a penny because the federal estate tax was non-existent. Congress was so busy campaigning and passing bad health care measures that they forgot to address the estate tax situation.
So, come January 1, 2011, the estate tax comes galloping back with a vengeance. Estates worth $1 million or more will be taxed at a whopping 55%. That is most of middle America. Many people who live in areas where there are high property values, such as the New York tri-state area and Los Angeles, can easily be worth $1 million if they own an average home and a small retirement account.
If there ever was a good time to die for the wealthy, 2010 surely was it and unless the new Congress does something to raise the federal estate tax exemption pronto, the ability of one generation to pass along what it has worked so hard for to the next will die a painful death.
I heard of one case this year where the coroner determined that a very wealthy man had died some time on New Year’s Eve, that being December 31, 2009 before midnight. He had been worth tens of millions of dollars but in 2009 he could only pass up to $3.5 million of it tax free. His body had not been found until late in the day on January 1, 2010 and his family was arguing that should have been the date of death for obvious reasons. It may be gruesome to think about but if life and death decisions have to be made this year, will the lack of a federal estate tax be influencing them? I shudder to think but the reality is that ghost sits squarely on Congressional shoulders.