Friday, June 3, 2011

Senate Bill Includes Portability of Exemption

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Late on December 9, Senate Finance Committee Chairman Baucus (D-Mont.) unveiled legislative language for the estate tax compromise reached by congressional Republicans and President Obama. As reported by BNA's Daily Tax Report, the bill includes the anticipated $5.0 million estate tax exclusion and a 35% tax rate, as well as a number of other eagerly-awaited details:

• the $5.0 million exclusion is indexed for inflation, starting in 2012
• the unified credit for gift tax is linked to the estate tax credit, i.e., $5.0 million
• the gift tax rate will be 35%
• the GST tax rate for transfers made during 2010 is set at zero
• the estate of a surviving spouse may take advantage of the unused exemption of the first spouse to die, i.e., "portability" of the exemption.

It is expected that Democratic Senators will seek to amend the bill to either increase the estate tax rate or to reduce the exemption. Such efforts will probably be unsuccessful. A vote is expected on December 11 and, if successful, the bill will then move to the House, where its prospects are more uncertain.

Harold W. Pskowski, Managing Editor for Estates, Gifts and Trusts

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