The 55% Solution...Die Now; Save Later!

As an attorney, and one who deals to large degree in estate planning and probate, I am often asked the best thing a person can do to plan for the financial well being of his/her family after death. The answer is simple. Die before December 31, 2010. Because after that, you’re screwed!

People think that the estate tax is something only the rich have to worry about. That depends on your definition of “rich”. Ten years ago, the estate tax was 55% of everything over $1million. That’s right. 55%. Now a million dollars sounds like a lot of money, and it is.

But get out of the Youngstown area, where even in down real estate markets the average price of home is in excess of $250,000.00, it really isn’t. For family farms it is even worse. And it is downright terminal for small businessmen who employ several people. In the old days, the farm and business had to be sold in order to pay the taxes. Imagine. 55% of every already taxed dollar you saved or invested taken by the government.

So the Republican Congress decided to do something about it. You know those so called Bush Tax cuts? Over the last 10 years it phased out the federal estate tax… and if you die right now…in 2010…the federal estate is zero!!! George Steinbrenner knew what he was doing when he checked this past week. Last year, the exemption was $3.5 million, and that was livable.

But with the expiration of the Bush tax cuts on New Year’s Day, guess what. It’s baaaack!!! And the federal estate tax exemption drops back to $1 million. Small businessmen and farmers are freaking, as well they should.

For people like me, it means good business. I get to pull out all those rusty tricks like Generation Skipping Trusts…A/B Credit Shelter Trusts…Insurance Trusts…and buy stuff you can give away without having to declare it…like gold coins and art and antiques. (Now I would never advise that!!!)

The accountants are also salivating. There is good money in filling out all of the those Federal estate tax forms, not to mention all of the financial advice necessary to work your way around this onerous and confiscatory disaster of a tax.

There currently is a bi-partisan effort in the House of Representatives to address the issue, and to cap the tax at the 2009 rate, which is a good compromise. But it is Harry Reid who will decide whether to bring it to the floor. The chances of that happening are slim to nothing.

So…my financial advice to you is simple. Die now so you won’t have to pay later. And with Obama care now the law, he will help show you the way.