Wednesday, December 30, 2009

New Year's resolution: Stop breathing

CPAs and financial planners have been joking about what would happen in 2010 for several years now. In the most morbid tax planning context we’ve ever seen, 2010 is the year for rich people to kick the bucket.

You see, in 2001 Congress changed the exemption schedule for estate taxes, increasing the exemption to $3.5 million in steps over the decade. The final increment was to get rid of estate taxes altogether starting in 2010.

No one, and I mean no one, thought that Congress would allow estate taxes to disappear, particularly after the Democrats wrested control of both houses and the presidency. But here we are on the cusp of 2010 and Congress, perhaps distracted by health care and Fox News, has not extended the current $3.5 million exemption into next year.

That was my expectation—that Congress would extend the current rule and keep it at that level for the foreseeable future. The other looming change is that the estate tax exemption is scheduled to return in 2011 at the old $1 million level. This sunset provision of the Bush tax cuts was never expected to come about, but now we’re all starting to wonder.

So what is the practical aspect of estate taxes vanishing in 2010? If you’re rich—meaning that you are worth more than a) $3.5 million if you believe Congress will eventually reinstall that exemption limit, b) $1 million if you believe Congress will do nothing and we’ll go back to the old law, or c) pick a number you think Congress will settle on—then you’ll want to die during 2010 in order to save your heirs hundreds of thousands, perhaps millions of dollars in estate taxes.

It has been reported that gravely ill rich people are being kept alive by every means possible with caring family members cheering them on, hoping to share that last drop of the ball in Times Square. After the champagne is sipped and everyone kisses each other under the confetti falling from the hospice room ceiling, the heirs will gather their coats and gloves, pull the plug on grandma, and head home.

This will be playing out all over America tomorrow night. Hey, who wouldn’t be motivated to hang in there a few more hours just to screw Uncle Sam?

Copyright 2009 Randy Hunt


  1. For my Massachusetts readers, the estate tax exemption is still $1 million in MA, which has not changed in many years. So your decision whether or not to drop dead in 2010 should be based solely on Federal law.

  2. Randy-

    Funny stuff!

    Lets be clear though before too many of your readers decide to snuff out Great Aunt Milly or Ma and Pa………step one has to be, of course, for someone you know (and love) to actually become a millionaire

  3. Promote the FAIR Tax!

  4. Randy, The real answer here is to never believe anything Washington, DC says, or promises. Most average folks have their wealth tied up in their homes. Under the old law as I recall, It was always suggested that you save receipts for any improvements made to your home/property as a means of mitigating going over the $1 Million threshold. I am assuming, but need to check, if that is still true. Its amazing how the purchase of screws and nails to better your property can help, when our time comes.


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