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Anderson, Dorn & Rader, Ltd.
Home » Estate Planning » Estate Tax Inequities

Estate Tax Inequities

May 6, 2011 by Gerald M. Dorn, Estate Planning Attorney

Last year, estate planning attorneys were placed in a difficult position because there was a lot of uncertainty regarding the future of the estate tax parameters. If the laws stayed unchanged as they were throughout most of the year, the estate tax exclusion would have been $1 million and the rate of the tax would have been 55% at the beginning of 2011. Due to provisions contained in the Bush-era tax cuts, the estate tax was repealed for 2010, but in 2009 the rate of the estate tax was 45% and the exclusion was $3.5 million.
Because of the new tax relief legislation that was signed into law by the president on December 17th, we now have a $5 million exclusion and a 35% maximum rate, but this act is set to expire at the end of 2012. As it stands right now, at the beginning of 2013 the rate of the tax will once again go back up to 55% and the exclusion will revert to the $1 million that was in place in 2002.
All this movement has a lot of people scratching their heads and this is one of the reasons why there is so much support for a permanent repeal of the estate tax. But the reality is that some people have already been victimized and treated differently than others over a period of just a few years. Let’s look at a very simple example.
Let’s say that you live on a block where everyone has a $5 million estate. If your across-the-street neighbor died in 2007 or 2008 when the estate tax exclusion was $2 million and the rate was 45%, his family would have had to pay the IRS $1.35 million. If your next-door neighbor died in 2009 when the exclusion was $3.5 million with that same amount of money, her heirs would have to pay $675,000. Now if your neighbor on the other side died this year, her $5 million estate wouldn’t be taxed at all.
These are hundreds of thousands and even millions of dollars we’re talking about that could make an enormous difference in the lives of your family members going forward into future generations. Even the most staunch pro-tax advocate would have to admit that there’s something fundamentally wrong with the inconsistencies highlighted above.

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Gerald M. Dorn, Estate Planning Attorney
Gerald M. Dorn, Estate Planning Attorney
Gerald Dorn is a shareholder and has been a partner at Anderson, Dorn & Rader, Ltd. Since 1998. Mr. Dorn has extensive experience serving wealthy families and business owners in the development of estate, tax and asset protection planning strategies. He made the decision to focus his practice in the area of estate planning after witnessing the personal grief and financial loss suffered by several of his clients as a result of poor planning. These experiences motivated him to dedicate his professional life to assisting his clients to preserve their life’s work for their heirs and to create a lasting legacy for those they love. Mr. Dorn is able to accomplish his mission through the use of a vast number of estate planning tools, both basic and advanced, for all of his clients at Anderson, Dorn & Rader, Ltd.
Gerald M. Dorn, Estate Planning Attorney
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Filed Under: Estate Planning, Taxes Tagged With: Elder Law, estate tax

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