Estate Tax to Continue

President-elect Barack Obama announced recently that he intends to continue the estate tax (dubbed the "Death Tax" by opponents) instead of letting it expire in 2010 as originally planned by the new Bush administration in 2001. Under the current provisions of the estate tax, estates over $3.5 million are taxed at 45%. Estates under $3.5 million ($7 million for married couples) are exempt from the tax. However, there is no guarantee the Obama administration will maintain the estate tax at this level. During President Clinton's administration, estates over $1 million were taxed at a 55% rate; President Bush increased the exemption gradually, with a proposed phase out completely next year.

The estate tax has been criticized as restricting a business owner's ability to pass on the fruits of a lifetime. The most common example given is of a family farmer who is "land rich and cash poor". Imposing a 45% tax on the value of the farm likely means the farm will have to be sold to pay Uncle Sam.

While most people will not have to worry about the estate tax in their estate planning, everyone should be aware of its existence and now of its permanence.