”Tremendous Upheaval” Over Estate Tax

An IRS Prediction by Senator Charles Grassley

By Robert Giese

Senate Charles Grassley (R-IA) is the ranking Republican on the Senate Finance Committee. In a conference call with several reporters on June 2nd, 2010, he discussed the uncertain future of the estate tax.

The Proposal [Kyle-Lincoln Estate Tax Compromise]

Sen. Grassley noted that Sen. Jon Kyle (R-AZ) and Sen. Blanche Lincoln (D-AR) have proposed that the Senate Finance Committee pass an estate tax bill with a $5 million per person exemption and a 35% top estate tax rate.

However, Grassley expressed the opinion that “the Finance Committee would like to take up consideration of legislation, but we aren’t assured by the majority leader that the bill passed out of committee will be taken up on the floor.”

Senate Rules

Under the Senate rules, even if the Finance Committee were to pass the Kyle-Lincoln estate tax compromise, Majority Leader Harry Reid (D-NV) is not obligated to schedule a floor vote and could simply stall the legislation.


In December of 2009, the House passed the Permanent Estate Tax Relief for Families, Farmers and Small Businesses Act of 2009. This makes permanent the 2009 estate exemption of $3.5 million and top estate tax rate of 45%. If the House and Senate are not able to take action on estate taxes by the end of 2010 then on January 1, 2011 the estate tax returns with a 55% top rate and an exemption of $1 million (plus indexed increases).

This would affect many medical professionals as well as hardworking Americans.


If this were to happen, Sen. Grassley stated that there will be a “tremendous upheaval at the grassroots of America.”

And so, we invite IRS head Douglas Shulman to respond. Your thoughts and comments on this ME-P are also appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, be sure to subscribe. It is fast, free and secure.

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7 Responses

  1. Bob,

    Good post. Here is a five minute guide to estate planning for the not-so-wealthy.




  2. Challenging Wills in Alaska

    Alaska is now on the short list of states that let people guard their wills against challenges after death.


    Mike Jackson and Gary Coleman where are you?

    [Financial Advisor]


  3. Senator Sanders Proposes Estate Tax Bill

    In December of 2009, the House passed an estate tax bill that continued the estate exemption at $3.5 million per person ($7.0 million for a couple). However, the Senate could not agree and the estate tax was repealed on January 1, 2010.

    Sen. John Kyl (R-AZ) and Sen. Blanche Lincoln (D-AR) claim they are close to an agreement for an estate tax compromise. Both advocate increasing the exemption to $5 million and reducing the rate to 35%. They believe that they are near the 60 votes needed for a 10-year phased-in plan.

    While it has not been publicly released, one version of the proposed Kyl-Lincoln compromise starts with an exemption of $3.5 million and an estate tax rate of 44%. Over a term of 10 years, the amounts are adjusted to a $5 million estate exemption and an estate tax rate of 35%. However, Sen. Max Baucus (D-MT) is not willing to bring the proposed compromise before the Senate Finance Committee for a formal vote.

    Sen. Bernard Sanders (I-VT) is an Independent but participates in the Democratic caucus. He has been joined by Sen. Tom Harkin (D-IA) and Sen. Sheldon Whitehouse (D-RI) in introducing a new estate tax bill.

    The three senators sent a letter to their colleagues and outlined the reasons for enacting an estate tax increase for Americans with larger estates. Sen. Sanders notes that a wealthy Houston resident named Dan Duncan passed away early in 2010 with an estimated $9 billion estate. If the Senate does not take action, this estate could be transferred to family with a savings of several billion in estate tax.

    Total estate tax savings in 2010 for heirs of Duncan and others with large estates are estimated to be $14.8 billion. This amount is lost revenue to the federal government in a time when all possible avenues for raising revenue are being explored.

    Sen. Sanders proposes the “Responsible Estate Tax Act of 2010.” This act would tax the first $3.5 million of an estate at 45%. Estates over $10 million would be taxed at 50%, with estates over $50 million paying tax at a rate of 55%.

    In addition, there would be a “billionaire” surtax of 10%. Sen. Sanders would “protect family farmers” by allowing a Sec. 2032A reduction in farm land for heirs who are actively farming of up to $3 million, an increase over the current $1 million limit. Finally, for estate conservation easements, the exclusion would be increased to $2 million and the base percentage to 60%.

    This proposal would also incorporate the Obama Administration’s recommendation to set a minimum term for the GRAT of 10 years and also to modify the rules to reduce minority and lack of marketability discounts for family limited partnerships.

    Sen. Charles Grassley (R-IA) did not support the Sanders bill but suggested that it may have been useful for Sen. Sanders and his supporters to place a plan on the table. He indicated that there are “quiet supporters of the junior senator from Vermont” and they will be influencing the overall result.

    Editor’s Note: Your editor and this organization take no specific position on any of the estate tax proposals. This information is offered as a service to our readers. The challenge for the Senate is the required 60 votes for passage do not yet exist for any of the proposed compromise bills. It now seems quite possible that the Senate will not act on estate taxes prior to the November election. If that is the case, it is likely that an effort to develop an estate tax compromise will take place in late November.

    Robert Giese


  4. Kyl-Lincoln Introduce Estate Tax Motion

    On July 14, 2010, Sen. Blanche Lincoln (D-AR) and John Kyl (R-AZ) introduced an amendment to H.R. 5297, the Small Business Lending Bill.

    Their amendment would modify the estate tax rules. Sen. Kyl and Sen. Lincoln claim that they now are close to the required 60 votes in the Senate for passage of their compromise on estate taxes. The bill includes five guidelines:

    1. Phase In – The increase exemptions and reduced rates would be gradually phased in over a period of 10 years.

    2. Estate Exemption – The exemption would start at the 2009 level of $3.5 million and increase to $5 million by 2020.

    3. Estate Tax Rates – The 2009 estate tax rate of 45% would be reduced by 1% per year to 35% by 2020.

    4. Optional 2010 Rules – For estates of 2010 decedents (such as Houston oilman Dan Duncan who passed away in March with an estate of $9 billion) there is an option to use the 2009 exemption of $3.5 million or accept the 2010 rules with no estate tax and a loss of the stepup in basis.

    5. Tax Offsets – The Senate Finance Committee is tasked with finding additional new taxes that offset the cost of increasing the exemption from $3.5 million to $5 million and reducing the top estate tax rate from 45% to 35%.

    Editor’s Note: Majority Leader Reid (D-NV) has not yet indicated whether he will permit a vote on this motion. If the 60 votes in favor of this compromise are available in the Senate and he permits a vote, then the House will need to consider the compromise. Previously, the House majority has maintained a strong preference for extending the $3.5 million exemption without further increases.

    Source: Children’s Home Society of Florida Foundation


  5. Estate Planning and the Rights of Test-Tube Heirs
    [Get ready for even more upheaval]

    There are times when technology runs far in advance of the market’s ability to incorporate it into broad-scale, daily use. Proto-typical examples includes politics, IT, legislative and legal case law, etc.


    Now, when it comes to dealing with the fruits of reproductive technologies, estate-planning law has not kept up with science.

    Dr. David E. Marcinko MBA CMP


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