Trust and Estate Counsel

Tennessee Estate Planning Law

Insight and commentary on estate planning issues impacting affluent residents of Tennessee

Politicians Benefit From Preserving Estate Tax Uncertainty

Congress has learned that maintaining the uncertainty in the future of the federal estate tax system allows them to collect substantial campaign contributions from special interest groups. Federal estate tax laws have been in a state of flux since the passage of a 2001 law that gradually increased the estate tax exemption, decreased rates, and totally repealed estate taxes for the year 2010. The 2001 law was the result of an intense lobbying effort by a group of wealthy families that have spent more than $500 million in lobbying expenditures. These families want Congress to eliminate federal estate taxes. While certain Congressmen have benefited from these lobbying expenditures, other Congressmen have benefited from lobbying expenditures from various groups that wanted to retain the estate tax.

The enclosed article by the National Center for Policy Analysis titled The Politics of Estate Tax Reform predicts that Congress will reinstitute the estate tax at 2009 levels with an exemption of $3.5 million per person and a maximum rate of 45%, retroactive to January 1, 2010. Indeed, the President’s budget proposal favors this approach and the President recently signed legislation which increases the likelihood that exemptions and rates will be returned to the 2009 rates for the years 2010 and 2011 only. Under this approach, the estate tax exemption would decrease to $1 million and the maximum rate would increase to 55% beginning in 2012. Such a short-term fix would keep the issue alive so that Congressmen would be able to collect additional campaign contributions.