In San Diego the cost of housing is one of the highest in the nation. For many of us, our home is the primary asset in our estate. One of the issues in the upcoming presidential campaign is the repeal or modification of the federal estate tax exemption. The outcome of the election may have an effect on whether your estate will be subject to estate taxes. As discussed below however, regardless of the election, you should not postpone creating an estate plan, the central document of which would be a revocable living trust.
The Estate Tax, often called the death tax, is a tax on the estates of the deceased in the United States. Tax-cut legislation enacted in 2001 provided for 10 years of increasing exemptions. Current law is that those with taxable estates over $2 million will be subject to estate taxes. If the estate is more then $2 million, the remainder is taxed at 45%. In 2009 an estate over $3.5 million will be taxed. Unless Congress acts to repeal or change the current law, the tax will be completely eliminated in 2010 but will be reinstated in 2011 to tax estates over $1 million with a top rate of 55%.
The repeal or elimination of this tax entirely has been suggested by many fiscal conservatives, primarily Republicans. Where do the Presidential candidates in the upcoming election stand?
Democrats argue that a total repeal would benefit the wealthy. Senator Obama has publically opposed doing away with the estate tax entirely. He voted against a repeal of the estate tax in June 2006. Recently he hasn’t mentioned any idea short of a repeal but most people think he would freeze the estate tax exemption at 2009 levels which imposes estate taxes on estates over $3.5 million.
John McCain voted in favor of repealing the federal estate tax when a bill was introduced in Congress in June of 2006. ( HR 8 ) He has been quoted as saying that he favors an exemption of estates under 5 million.
Don’t postpone a decision on your estate planning until after the election. Regardless of who wins the election, it appears we may have federal estate taxes in some form. If we return to the exemption threshold of $1 million, there will be many Americans, and particularly Californians who will potentially have estate tax issues. In San Diego where the average price of a home is still close to $600,000 most people who own a home and additional assets such as IRAs, 401(k)s, mutual funds, or other assets may easily have an estate valued at $1 million. At Law Office of Scott C. Soady, A Professional Corporation we can assist you with an estate plan to address whatever the federal estate tax level may be at the time of your death. With a revocable living trust as the key element of your estate plan, you may be able to reduce the amount of estate taxes which have to be paid. Contact us by e mail or phone for a complimentary consultation on this or any other estate planning issue.