Federal taxes usually due at death have recently grabbed the attention of the living. A number of Republican lawmakers, as well as GOP presidential hopeful George W. Bush, want to do away with the federal estate tax. Bush's plan would phase out the federal tax on large estates over an eight-year period.
Why the drive for repeal? Critics of the tax insist it's unfair. Congress did make some changes to estate tax laws when it passed the Tax Relief Act of 1997. Under the '97 law, the unified credit was raised over a number of years. In 2000, for example, the credit increased to $220,500. As a result, use of the credit now exempts the first $675,000 of an individual's estate from taxes ($1.35 million for married couples). Also, the credit increases over several years with the effective individual exemption reaching $1 million ($2 million for legally married couples) in 2006.
But although the current talk seems to revolve mainly around repeal, few analysts expect Congress to go quite that far. "Wiping out the estate tax is a very hard sell to make," says estate planner Beverly Brooks, who was president of the Society of Financial Service Professionals, and is currently a chartered life underwriter and an accredited estate planner with BrooksBittner & Associates LLP, in Dallas. Instead of a total repeal, tax experts are expecting lawmakers to make some additional adjustments to the existing unified credit.
One of the many tax experts who are predicting that efforts will be made to improve upon the already existing law is Evelyn Capassakis, a partner in charge of the trusts and estates group for PricewaterhouseCoopers in New York City. She says there is a distinct possibility that lawmakers will eventually decide to make the $1 million exempt transfer amount immediately available instead of having to wait until 2006.
Joan Szabo is a writer in Great Falls, Virginia, who has reported on tax issues for more than 13 years.