Use of Gift Tax Exemptions to Reduce Estate and Gift Tax
Congress reinstated the federal estate tax for 2010 and thereafter, setting the unified federal estate and lifetime gift tax exemption amount at $5 million for 2010 through 2012. For 2012, the amount is inflation-adjusted to $5,120,000. This increased amount is well above the $3.5 million amount effective for 2009. Although the exemption amount and tax rates after 2012 are uncertain, there is no doubt that the estate tax is here to stay. Therefore, a person should consider making sufficient lifetime gifts so that his or her estate will not exceed the exemption amount in effect at death.

Please understand that lifetime gifts are subject to a gift tax imposed at the same rate as the estate tax. This “unified” system is intended to eliminate any tax advantage to making gifts. But certain types of lifetime transfers are not subject to gift tax, and year’s end could be a good time to make such gifts.

Annual Gift Tax Exclusion
The most commonly used method for tax-free giving is the annual gift tax exclusion, which allows a person to give each donee up to $13,000 each year during 2011 and 2012 without reducing the giver’s estate and lifetime gift tax exclusion amount. A person is not limited as to the number of donees to whom he or she may make such gifts. Thus, if an individual makes $13,000 gifts to 10 donees, he or she may exclude $130,000 from tax.

In addition, because spouses may combine their exemptions in a single gift from either spouse, married donors may double the amount of the exclusion to $26,000 per donee. Because the annual exclusion is applied on a per-donee basis, a donor can leverage the exclusion by making gifts to multiple members of the same family. Thus, a donor could make a $13,000 gift to his son and a $13,000 gift to his daughter, for a total of $26,000 in tax-free gifts. He could double this tax-free amount to $52,000 if his spouse joins in the gifts.

The annual gift tax exclusion applies to gifts of any kind of property, although certain types of property may require an appraisal. Gifts of appreciated property also could result in income tax savings, because the recipient would pay the capital gains tax on any sale. The threat of higher income tax rates in future years makes this an important consideration.
Because a donor may not carry over his or her annual gift tax exclusion amount to the next calendar year, year-end gifting is critical so as to maximize the exclusion’s benefits for each year. If a donor wishes to make a gift exceeding the exclusion amount, he or she can effectively double the exclusion by making one gift in December and the second in January. For example, a married couple could make a tax-free gift of $52,000 to any individual by making a gift of $26,000 in December 2011 and another $26,000 gift in January 2012.

Note that Congress substantially increased the estate and lifetime gift tax exclusion amount, mentioned above, from $1 million in 2010 to $5 million in 2011 and $5,120,000 in 2012; thus, providing a two-year window for maximizing such giving. Congress also provided that, if a spouse dies in 2011 or 2012 without exhausting his or her estate and lifetime gift tax exclusion amount, because of the new portability rules, the surviving spouse may be able to gift against that amount. This latter provision does not apply to gifts given to grandchildren, i.e., generation-skipping transfers.

Tuition Payment Exclusion
In addition to the annual gift tax exclusion, a person may make tuition payments for any individual without incurring gift tax. Though the amount that may be excluded is not limited, all payments must be made directly to a tax-exempt school at any level, for the purpose of education or training. The exclusion applies only to tuition. Thus, payments for room and board, books, required equipment, or related expenses are not excludible. Because there is no limit on the gift amount, its timing is less important than with the annual exclusion. Nevertheless, if a person has the choice of making either a tuition payment or an annual exclusion gift for a particular beneficiary, it usually is preferable to make the tuition payment, because he or she still could make an annual exclusion gift later in the year.

Congress recently extended the income tax deduction for tuition payments through 2011. To obtain the deduction, the tuition payment must be made to an institution of higher education on behalf of a dependent, and the payor’s adjusted gross income must be below certain limits. Thus, a tuition payment may have some income tax advantages.

Section 529 College Savings Plans
Contributions to a college savings plan established according to Section 529 of the Internal Revenue Code (529 plan) do not qualify for the exclusion for tuition payments, but are covered by the $13,000 annual gift tax exclusion. A contribution to the plan also may entitle the contributor to a state income tax deduction. Thus, a contributor can reduce his or her own income taxes by funding a 529 plan with savings that would have been used for college anyway.

Qualified distributions from a 529 plan may be used for a wide range of educational expenses, including tuition, fees, books, supplies, required equipment, and room and board, but not transportation costs. An added advantage of a gift to a 529 plan is that, generally, the income earned by plan contributions is tax-free, so long as it eventually is used for qualified educational purposes. Also, because the contributor may be the plan’s custodian, he or she can ensure that the beneficiary uses the account for educational purposes.

A special rule allows a contributor to utilize up to five annual gift tax exclusions simultaneously when funding a 529 plan. He or she may fund the plan with up to $65,000 (5 × $13,000) this year, then file an election with the IRS to spread this gift over five years (2011 through 2015) for gift tax purposes. By using five annual exclusions, the entire gift becomes gift-tax-free, although the contributor must wait until after 2015 to make another tax-free contribution.

Medical Payment Exclusion
A person may exclude from gift taxes all payments he or she makes directly to medical providers on behalf of another individual. These medical expenses must be of the type that would qualify for a medical tax deduction. The exclusion for medical payments also includes the payment of medical insurance premiums. Thus, paying a child or grandchild’s insurance premiums is an efficient means of making a tax-free gift that does not consume either the annual gift tax or the estate and lifetime gift tax exclusions. Further, the payor may claim an income tax deduction for a payment made for his or her spouse or dependent.

Gifts in Trust
Despite the tax savings, a person may be uneasy about making outright gifts to children or grandchildren, due to the loss of control over how they use the gift. We can address these concerns by making the gifts in trust, which allows the trust creator to determine when the beneficiaries receive the money and how it is used.

Special requirements exist that ensure that a gift in trust qualifies for the $13,000 annual exclusion. Generally, the trust is drafted to provide the beneficiary with temporary withdrawal rights over the gift (usually for 30 days), such that the gift is considered a present interest rather than one that vests in the future. Although this arrangement presents a risk that the beneficiary could withdraw the gift from the trust, the likelihood of the trust creator terminating any further gifts to the trust is usually sufficient to prevent such withdrawals.

Charitable Gifts
Year end is a good time to review charitable giving to ensure it is accomplished in the most tax-efficient manner. Charitable giving is a form of estate planning because a gift to charity never will be subject to estate or gift tax, and provides the giver with an immediate income tax deduction. If a person wishes to make a large gift before January 1, his or her circumstances must be reviewed to determine the gift’s impact on the giver’s 2011 income tax liability and whether all or a portion of the gift should be deferred to 2012. If the gift is property and requires an appraisal (usually for gifts of property with a value in excess of $5,000, other than publicly traded stock), the process must be started as soon as possible so that the appraisal is available before year end.

We hope that the information in this article is useful in your gift planning for 2011 and 2012. If you wish to take advantage of any of the planning techniques that we have described, please feel free to call.

Written by Brenda Logsdon, CPA. Brenda is a partner at The Whitlock and has worked in public accounting with a specialization in taxation since 1975. She has significant experience in tax strategy planning regarding mergers and acquisitions and serves as practice partner-in-charge of income, gift and state taxation. Brenda provides planning and consulting services for clients in a variety of industries including not-for-profit organizations, financial institutions, wholesale and retail distribution, manufacturing, medical practices, construction and real estate development companies. She also provides tax planning for complex corporations, partnerships and trusts.

As part of this commitment, we are including a link to the Estate Planning Guide to highlight the need for estate planning and estate-planning strategies. This guide incorporates provisions of recent tax changes and shows how to take advantage of them to maximize the benefit to your heirs and minimize taxes. Please click here to view the guide.

The expert advice of a professional advisor cannot be substituted. The estate planning ideas in this booklet are offered as suggestions only. As you begin to consider your estate planning needs, we encourage you to contact us concerning your specific situation while developing your estate plan.

We welcome the opportunity to provide you with expert guidance and help your heirs benefit from effective planning. Call to schedule an appointment and discuss your situation with our qualified professionals and create a bright future today.

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Separately, on October 22, House Ways and Means Committee Chair Charlie Rangel (D-NY) said that he was in the process of drafting language that would make the estate tax permanent. Rangel said that because of the focus on the health reform bill, it was unclear when the bill would come to the House floor. He did say, however, that he didn’t expect to unveil his estate tax proposal until after next week’s Democratic caucus meeting, at which time he would discuss his proposal with members.

We will keep you posted on further developments.

Four committees, House Ways and Means, House Education and Labor, House Energy and Commerce, and Senate Health, Education, Labor, and Pensions (HELP) have all approved health care reform bills along party lines. The Senate Finance Committee (SFC) is the only committee continuing bipartisan discussions as it continues to slowly draft its health care reform bill.

Excise tax

Although the SFC had been expected to mark up a bill before it recessed in August, this plan fell apart as negotiations broke down over how to pay for health care reform. The SFC has rejected a House-proposed surtax and is alternatively considering imposing an excise tax on insurers. This excise tax would apply to high-cost health insurance plans. Members are reportedly looking at taxing “Cadillac plans” valued at more than $10,000 for individual coverage and more than $25,000 for family coverage.

Surtax

The House is expected to approve a gradual surtax on higher-income individuals to fund health care reform, despite strong opposition from the GOP and some Democrats. The surtax marked-up by the Ways and Means Committee in July would generally start at one percent for single individuals with modified adjusted gross income (AGI) exceeding $280,000 and married couples filing joint returns with modified AGI exceeding $350,000. The proposed surtax would reach 5.4 percent for married couples filing jointly with modified AGI exceeding $1 million and single individuals with modified AGI exceeding $800,000.

Small employers

Bills approved by the House committees and the Senate HELP Committee would mandate that employers offer health insurance to their employees or pay an additional payroll tax. Additionally, employer-provided health insurance would also have to meet certain minimum standards or employers whose plans do not meet the standards would be required to pay a penalty. All of the committees agree to provide relief to small employers but have not agreed on the scope of relief.

The most generous relief proposed to small employers comes from the House Energy and Commerce bill. Employers with annual payrolls of $500,000 or less would be exempt from providing health insurance coverage to their employees and would also be exempt from the additional payroll tax.

The House Ways and Means and House Education and Labor bills propose more targeted relief to small employers. Employers with annual payrolls not exceeding $250,000 would be exempt from the additional tax. Very small employers (generally businesses with fewer than 10 employees) would also be eligible for tax credits to offset the cost of health insurance. The Senate HELP bill, on the other hand, would provide tax credits to employers with fewer than 50 employees.

Congress returns to work on September 7^th. Our office will continue to monitor important developments in the debate on health care reform and in connection with other pending tax laws.

Making Work Pay credit

Many wage earners are seeing an increase in their tax-home pay because of the Making Work Pay credit. Employers started using new withholding tables reflecting the credit in April. However, individuals with multiple jobs and some pension recipients may discover they had too little tax withheld when they file their 2009 returns in 2010. In May, the IRS issued a withholding option for pension plans to offset the Making Work Pay credit. The IRS also reminded individuals with more than one job to adjust their withholding.

Cash for clunkers

You may have been hearing about the new federal program to encourage people to trade-in old “clunkers” for new fuel efficient vehicles. Under the “cash for clunkers” program, consumers are eligible for tax-free vouchers of either $3,500 or $4,500 toward the purchase or lease of a new, more fuel-efficient vehicle. The consumer will not recognize taxable income as the result of the voucher. The amount of the voucher generally depends on the type of vehicle purchased and the difference in fuel economy between the purchased vehicle and the trade-in vehicle. You will not receive a paper or electronic voucher. Rather, vouchers are applied to the purchase price of the vehicle by participating dealers. The cash for clunkers program began on July 1, 2009 and will end on November 1, 2009, or when the $1 billion allotted for the program is depleted.

First-time homebuyer credit

In April, the IRS reminded taxpayers that they cannot claim the first-time homebuyer tax credit in anticipation of a future purchase. Taxpayers qualify for the credit when they finalize the purchase of their home, which for most purchasers occurs at the time of the closing, the IRS explained. The first-time homebuyer credit reaches $8,000 for purchases between January 1, 2009 and November 30, 2009. Taxpayers must be qualified buyers and satisfy income requirements.

In good news for home buyers, the U.S. Department of Housing and Urban Development (HUD) will allow taxpayers to monetize the first-time homebuyer credit. Taxpayers financing through a state housing agency and other HUD-approved tax credit advance programs can monetize 100 percent of the down payment. Taxpayers using Federal Housing Administration (FHA) lenders can apply the credit to closing costs or make a larger down payment above the FHA-required 3.5 percent minimum.

Motor vehicle sales tax deduction

Taxpayers in states without a sales tax can deduct other fees to take advantage of the temporary motor vehicle sales tax deduction. The motor vehicle sales tax deduction is a temporary incentive created by the 2009 Recovery Act. The amount of the deduction is limited to the portion of the state sales or excise tax imposed on the first $49,500 of the purchase price of the vehicle, and is subject to adjusted gross income (AGI) phaseouts. According to the IRS, Congress intended for all taxpayers and not just taxpayers in states with a sales tax to benefit from the incentive.

Cell phones

An employee may exclude from gross income the business use of an employer-provided cell phone as a working condition fringe benefit. Twenty years ago, the government imposed tough documentation requirements for employer-provided cell phones. At that time, cell phones were new and very expensive, and the IRS was concerned about abuses. Today, cell phones are everywhere and both the price of phones and calling costs have fallen dramatically.

The IRS announced that it will revisit the documentation rules. In contrast to some reports, IRS Commissioner Douglas Shulman said that the agency is not “cracking down” on employer-provided cell phones, but is trying to make the rules less burdensome on employers and employees. Shulman said that the Treasury and the agency support the removal of cell phones from the category of so-called listed property under Code Sec. 280F, a designation that subjects business cell phones to strict substantiation requirements before their use by employees can be excluded from income. The IRS is considering three alternative methods to simplify the substantiation requirements: a minimal personal use method, a safe harbor substantiation method, and a statistical sampling method, or a combination of the aforementioned methods.

Vehicle depreciation dollar limits

The IRS issued the depreciation limits for business automobiles, trucks and vans first placed in service in 2009 as well as the annual income inclusion amounts for vehicles first leased in 2009. The 2009 depreciation limits for passenger automobiles are the same as the 2008 limits while the depreciation limits for trucks and vans are lower than the 2008 limits. The IRS also described the additional first year depreciation deduction provided by 2009 Recovery Act.

Tax evasion

The IRS is undertaking a major initiative to encourage taxpayers to disclose unreported foreign bank accounts and assets. In exchange for full disclosure, the IRS will not criminally prosecute tax evaders. These taxpayers must pay all back taxes plus interest and penalties, although the IRS will waive the 75 percent fraud penalty. The settlement offer is temporary and is only available through mid-September 2009.

Our office will keep you updated on all these, and other, tax developments. If you have any questions about these or any federal tax developments please contact our office.

Individual coverage

One of the most far-reaching changes would be the mandate that all individuals obtain health care coverage. Individuals would be insured wither through their employer or by participating in a new national exchange (also referred to as a “gateway”). In the exchange, individuals would shop among private insurers and a possible public health insurance plan. Congress is expected to impose a tax on individuals who do not obtain insurance. Lower-income individuals, however, would receive a credit or voucher to help pay for the cost the cost of coverage.

Employers

Employers would be required to offer health care coverage or pay for coverage. Employers that opt out of providing coverage would pay an additional tax. Employer-provided coverage would also have to meet certain minimum standards. Small employers would be eligible for tax credits to help offset the cost of coverage.

Surtax

President Obama has promised that health care reform will not add to the federal deficit. Very few revenue raisers would generate the amount of money needed to fund health care reform. The House version of health care reform includes a surcharge on higher income individuals. The surcharge is estimated to raise more than $500 billion over 10 years.

For married couples filing jointly, a surtax of one percent would apply to the couple’s modified AGI that exceeds $350,000 but does not exceed $500,000; a 1.5 percent rate would apply to the couple’s modified AGI that exceeds $500,000 but does not exceed $1 million; and a 5.4 percent rate would apply to the couple’s modified AGI that exceeds $1 million.

For single individuals and heads of household, the dollar amounts would be 80 percent of the above-mentioned amounts. For married couples filing separately, the dollar amounts would be 50 percent of the above amounts. Moreover, the one and 1.5 percent rates would be increased to two and three percent if certain health care cost savings are not achieved by 2013.

Possible revenue raisers

The $1 billion price tag of health care reform has lawmakers looking at every option to generate revenue. Some of the proposals being debated are:

• Delaying the effective date of worldwide allocation of interest rules;
• Codifying the economic substance doctrine;
• Limiting treaty benefits involving foreign multinational corporations;
• Modifying or repealing the itemized deduction for medical expenses;
• Limiting the student FICA exception;
• Extending Medicare payroll tax to all states and local government employees;
• Modifying or repealing the exclusion for employer-provided reimbursement of expenses under FSAs and similar arrangements;
• Imposing an excise tax on sugar-sweetened beverages;
• Heightening requirements for a hospital to keep its tax-exempt status; and
• Reducing the special deduction for non-profit “Blues.”

The health care reform debate is likely to continue into the autumn and possibly longer. If you have any questions about the pending legislation, please contact our office.

However, beginning in 2010, everyone, no matter what their income level or filing status, will be able to have a Roth IRA. The question that remains to determine is when you should convert, if at all.

Spreading out your tax liability

A conversion is treated as a taxable distribution, but is not subject to the 10 percent early withdrawal penalty. However, taxpayers who convert to a Roth IRA in 2010 (and 2010, only) have the ability to pay taxes on the converted amount ratably over two years, in 2011 and 2012. Therefore, if you convert to a Roth in 2009, you must recognize the entire converted amount in income on your 2009 tax return.

Changes for 2010

In 2010, the $100,000 modified AGI cap that has prevented many individuals from establishing a Roth IRA, or converting from their traditional IRA to a Roth, is completely eliminated. Moreover, the filing status limitation will also be done away with, meaning that married couples filing separately will be able to contribute to a Roth IRA as well. However, all other rules continue to apply, and any amount you convert to a Roth IRA will still be taxed as ordinary income at your marginal tax rate. The exception for 2010, of course, is that you will have the choice of recognizing the conversion income in 2010 or averaging it over 2011 and 2012.

Example 1. You have $28,000 in a traditional IRA, which consists of deductible contributions and earnings. In 2010, you convert the entire amount to a Roth IRA. You do not take any distributions in 2010. As a result of the conversion, you have $28,000 in gross income. Unless you elect otherwise, $14,000 of the income is included in income in 2011 and $14,000 is included in income in 2012.

Example 2. On the other hand, if you currently meet the AGI and filing status requirements to convert to a Roth IRA (that is, your AGI for 2009 will be less than $100,000 and your filing status is not “married filing separately” you can also convert this year. But, you will recognize all the conversion income in 2009 instead of having it spread over two years. Therefore, if in the example above you convert the entire $28,000 to a Roth IRA in 2009, you will pay tax on the entire $28,000 conversion amount in 2009.

Taking advantage of lower tax rates

Currently, the income tax rates are at a historic low. But these rates are scheduled to revert to previously higher levels (and rise further for some taxpayers) after 2010. The Obama administration has proposed extending the lower individual marginal income tax rates but raising the two highest income tax brackets to 36- and 39.6-percent after 2010. This should be considered in your decision of when (and if) to convert to a Roth in 2010, or now in order to take advantage of the lower income tax rates, especially if you expect to be in one of the two highest income tax brackets after 2010.

Conversions in years after 2010 will be included in your income during the tax year in which you completed the conversion to a Roth IRA. While deferring tax is a traditional and beneficial part of tax planning, if you convert in 2010 the tax will be spread out ratably in 2011 and 2012, and therefore taxed at the rates in effect for 2011 and 2012 (which as mentioned could be higher for some taxpayers). Thus, if income tax rates go up, which they are anticipated to do, you may end up paying much more tax. Therefore, if you do not want to take this chance that your income rate will be higher in 2011 and 2012, you may want to elect to pay the full tax on the Roth conversion in your 2010 income tax return, at 2010 income tax rates.

So why would you accelerate a conversion? If you believe your IRA assets are currently valued on the low side, you might opt for a conversion if you are below the $100,000 AGI level for 2009. This reduces your tax liability on the conversion. Similarly, if you converted within the past year and the value of the assets has declined since then, you can elect to “undo” the conversion. Otherwise, you will have paid tax on the conversion when the assets were at a higher value.

Undoing the conversion later

If you convert to a Roth IRA, but later change your mind, you have until Oct. 15 of the year after the year of conversion to undue the transaction and go back to your traditional IRA. For example, if you convert in 2009, you will generally have until October 15, 2010 to recharacterize the transaction. However, to do this you must have filed your individual tax return by the normal filing deadline (April 15, generally) or if you obtained an extension, the extension due date.

For example, if the value of your Roth drastically declines after the conversion, and leaves you essentially with a Roth IRA value that is even less than the tax you paid to convert, this would be a good reason to undo the transaction. Recharacterizing the conversion would undo the tax consequences and therefore you’d get back the tax you paid on the larger amount that was converted to the Roth IRA.

Can you afford the conversion tax?

You will have to pay a conversion tax on the transaction, which can be a significant sum. In spite of all the advantages of a Roth IRA, a conversion is generally advisable if you can readily pay the tax generated in the year of the conversion. If the tax is paid out of a distribution from the converted IRA, that amount is also taxed; and if the distribution counts as an early withdrawal, it is also subject to an additional 10 percent penalty. For those planning to convert who may not already have the funds available, saving now in a regular bank or brokerage account to cover the amount of the tax in 2010 can return an unusually high yield if it enables a Roth IRA conversion in 2010 that might not otherwise take place.

Determining whether to convert to a Roth IRA can be a complicated decision to make, as it raises a host of tax and financial questions. Please call our offices if you have any questions about the Roth IRA conversion opportunity.

Making Work Pay credit

The centerpiece of President Obama’s individual tax incentives is the Making Work Pay credit. Many individuals are already receiving the benefit of this credit in their paychecks. The credit reaches $400 for single taxpayers and $800 for married couples filing joint returns if they fall below certain income limits. The credit, however, is temporary and will expire after 2010. President Obama is asking Congress to make the credit permanent but many in Congress worry that a permanent credit would be too expensive.

More middle-income Incentives

Several other incentives are also targeted to middle-income taxpayers. These include marriage penalty relief, a permanent American opportunity education tax credit and permanent extension of lower individual marginal income tax rates (except for the 36 and 39.6 percent rates). The president has also proposed extending the state and local sales tax deduction, the higher education tuition deduction, the teacher’s classroom expense deduction, the saver’s credit, and the deduction for charitable contributions of IRA funds. These proposals enjoy significant support in Congress and are expected to pass.

President Obama did not propose extending several new tax breaks. These include the first-time homebuyer credit, which sunsets after December 1, 2009, and the deduction for state and local taxes paid on motor vehicles, which expires after December 31, 2009. The first-time homebuyer is popular in Congress and lawmakers may extend it one or two more years, especially if home sales remain slow.

Higher-income taxpayers

More controversial are the president’s proposals for higher income individuals. As mentioned, the top two individual marginal income tax rates would revert to 36 and 39.6 percent after 2010. President Obama has also proposed reinstating and expanding limitations on itemized deductions for higher-income individuals along with reinstating the personal exemption phaseout for higher-income individuals.

The White House generally defines higher-income taxpayers as individuals with incomes above $200,000 and families with incomes above $250,000. It is unclear if these amounts refer to taxable income or adjusted gross income. More details are expected to be released when legislation is introduced in Congress.

Children

One of the most popular federal tax incentives is the child tax credit. The 2009 Recovery Act expanded the credit. President Obama has proposed making the enhanced child tax credit permanent.

The president has also recommended a permanent enhanced earned income tax credit (EITC). Under current law, more families are eligible for the EITC. However, the president has proposed eliminating the advanced EITC, which provides the credit in advance through payroll.

Capital gains

Under current law, the maximum tax rate on qualified capital gains and dividends is 15 percent. Some taxpayers may be eligible for a zero percent rate. These rates are temporary and will expire after 2010. President Obama has asked Congress to extend the lower rates for middle-income taxpayers. However, higher income individuals would be taxed at 20 percent on qualified dividends and capital gains under the president’s plan.

Health care

Congress has just started debating comprehensive health care reform. Lawmakers are looking for ways to fund health care reform. Under current law, the amount that an employer contributes to an employee’s health coverage is generally excluded from the employee’s taxable income. One idea being floated in Congress is to cap the tax exclusion for employment-based health care coverage. Administration officials have generally indicated their support for continuing the exclusion.

Retirement savings

During the campaign, then-candidate Obama often spoke about strengthening retirement savings, especially 401(k)s and similar defined contribution arrangements. The president has made one official proposal: mandatory automatic enrollment in IRAs. Generally, employers without a retirement plan would be required to offer automatic enrollment in an IRA to all employees on a payroll-deduction basis. White House officials have also discussed some “unofficial” proposals, such as the partial annuitization of 401(k)s, to strengthen retirement savings.

Estate tax

Eight years ago, Congress voted to repeal the federal estate tax for 2010. At that time, many observers predicted that repeal would be permanent. The recession has brought about different thinking. Instead of repealing the estate tax, the president has proposed extending the current rate of estate tax and exemption amount into 2010.

Congress has a lot of tax legislation on its agenda and is expected to enact much of it into law in late summer or early fall, maybe sooner. Our office will keep you posted of developments and please contact us if you have any questions.

Have you ever wondered what the heck is a CDO anyway?  Or how did CDO’s bring down the world’s greatest economy and lead to a worldwide financial crisis?  This is a great demonstration of how CDO’s work and how they were related to the financial crisis.