Chicago Tax Lawyers

Much of the current public debate over tax policy and the Bush tax cuts has focused on income tax.  The future of the estate tax is also a point of contention in Washington.  The Senate is divided on the issue.  There are two main camps of thought on what the highest estate tax bracket should be in 2011.  Some say 35% while President Obama and others have voiced support for the highest bracket being taxed at 45%.  If no new laws are passed before the new year, the highest estate tax rate will jump to 55% on January 1st.

A possible compromise is emerging in the Senate, pushed by Senator Maria Cantwell (D., Wash) with a small group of bipartisan support.  The plan is to allow wealthy individuals to create a prepayment trust.  Assets would be placed into this trust while the estate owners are still alive and they would then have five years to pay a 35% estate tax on the assets.

Assets transferred to the trust would be ineligible for the unified credit exemption and the assets would still be subject to income tax while they remained in the trust.

The supporters of the prepayment plan see it as a way to achieve the 35% rate without raising the deficit in the short term.  Opponents argue it will forfeit government revenue over the long term as compared to a 45% estate tax.  Sen. Cantwell has requested the Joint Committee on Taxation to review the proposal and assess the effects the plan would have.

For more information on estate tax planning or other tax law issues, contact the Chicago tax attorneys of Horowitz & Weinstein.

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