Trusts and Estates: The Candidates' Tax Plans

With the upcoming presidential election, many clients are inquiring about the impact it may have on estate and gift taxes. As you may be aware, the estate tax is currently scheduled to be repealed in 2010 for that year only, and then reinstated at pre-2001 levels in 2011 ($1 million exemption and top marginal tax rate of 55 percent). Both Barack Obama and John McCain have included changes to the estate tax laws in their platforms. The nonpartisan Tax Policy Center reports the candidates' current positions on this issue as follows:

Obama

Obama's plan would freeze the estate tax at its 2009 levels, retaining a $3.5 million exemption per decedent and top marginal tax rate of 45 percent. It is estimated that about 8,000 estates, representing 0.3 percent of decedents, would be subject to tax in 2011.

McCain

McCain's plan would raise the estate tax exemption to $5 million per decedent and reduce the top marginal tax rate to 15 percent. It is estimated that about 4,000 estates, representing less than 0.2 percent of decedents, would be subject to tax in 2011.

An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Revised August 15, 2008. http://www.taxpolicycenter.org.

Of course, either candidate may adjust his position. Moreover, no matter which candidate wins the upcoming election, any proposed legislation in this area will need to be considered and ultimately acted upon by Congress. It will be important to monitor developments in this area and consult with your tax and wealth management advisors as legislative action proceeds.