Well, that was quick.
Our last article gave an overview of the new parameters of the estate and gift tax portions of the Internal Revenue Code. These were enacted and signed into law only this January. Three months later, the Obama administration, in its budget proposal for fiscal year 2014, proposed an overhaul of the just-instituted system. The quotation marks in the article’s title are vindicated. If the new proposal is enacted, the existing structure will last only through 2017.
The proposal calls for a return, beginning in 2018, to the system that existed in 2009. The 40% top rate (which was 35% in 2012) would rise to 45%. There would be a reversion to the estate tax exclusion from $5 million (as adjusted for inflation) to $3.5 million with no inflation adjustment. The proposal would also de-couple the recently reunited estate and gift taxes by limiting the gift tax exemption to $1 million, also unadjusted for inflation.
The one reform that would remain is the portability of unused exemptions between spouses, if certain conditions apply.
Some Capitol Hill observers seem to feel that the climate is more in favor of a repeal of the estate and gift taxes than a reversion to higher rates and lower exemptions, but only a fool would speculate as to where we will wind up next, and we decline to do so.