The Duffey Law Firm Blog

Tuesday, December 14, 2010

States to Lose Revenue Under Obama – Republican Tax Deal

One aspect of the Estate Tax Deal which passed its first legislative hurdle in the Senate last night is the loss of potential revenue to the States.

California could lose as much as $2.7 Billion due to the change in the Estate Tax Law according to a Bloomberg.com report dated 12/14/10.

Under the current law, the Estate Tax would allow for a $1 Million Dollar Exclusion in 2011, and any amount over that would be taxed at 55%.

An important element of that taxing regime (current law) is that it would allow States to participate in the revenue stream created by that tax.   This is the so called “Soak Up Tax” which was part of the Estate Tax prior to the final years of the Bush Tax Cuts.

The “Soak Up Tax” was a feature of the prior taxing regime.  The Soak Up Tax is reportedly not part of the Obama – Republican Tax Deal.  The Soak Up Tax allowed states like Florida (that has no estate tax of its own) to benefit when a resident of that state owed estate taxes to the Federal government without in any way increasing the taxpayer’s estate tax liability.

The bottom line – some states like California and perhaps Florida may have been counting on those revenues to help them balance revenue starved budgets!


Tuesday, December 14, 2010

Opportunities Under New Estate Tax Law

Initial reports out of Capital Hill indicate that the new Estate Tax Law contained in the “Framework” agreed to by Obama and the Republicans could be a real opportunity for wealthy Americans.

According to sources on the Hill, not only will the Estate Tax Exemption Amount be $5 Million Dollars, but the Gift Tax Lifetime Exclusion Amount and the Generation Skipping Transfer Tax may also be set at $5 Million Dollars!

That would potentially provide wealthy Americans with an opportunity to transfer significant assets to second and third (and more remote) generations without the penalty of transfer taxes.

Some taxpayers may consider utilizing their lifetime gift exemptions to transfer up to $5 Million Dollars to children and grandchildren in trusts known as “Dynasty Trusts” or “Generation Skipping Transfer Tax Exempt Trusts.”

Properly structured strategies could result in beneficiaries receiving the benefits of significant wealth over many generations without any imposition of transfer taxes at each generational level.

Stay tuned for more details as the bill makes its way to the President’s desk!


Wednesday, December 8, 2010

Obama Cuts Tax Deal with Republicans!

ESTATE OF CONFUSION

Obama held a press conference on 12/6/10 to announce new Tax Deal with Republicans!  Here is what we know so far:

  • 1) two year extension of the Bush Tax Cuts (no restriction on taxpayer income);
  • 2) one year 2% reduction on Social Security withholding tax;
  • 3) Capital Gains and Dividend income will be taxed at 35% (for two more years) but perhaps the most contentious item of all -
  • THE ESTATE TAX EXEMPTION AMOUNT – $5,000,000.

Read more . . .


Wednesday, January 13, 2010

No Estate Tax in 2010 Could Mean Major Problem for Surviving Spouse

When the law was passed in 2001, almost no one believed that Congress would actually allow the Estate Tax to end in 2010, even for just one year.  When the Senate failed to act this past December, the unthinkable happened – the Estate Tax was repealed!  There is no Estate Tax for individuals dying in 2010!  You might think that is good news but you might be wrong!  The repeal of the Estate Tax may be a major problem for the surviving spouse and it could cost the beneficiaries of the estate significant tax dollars as well!  Here’s why.


Read more . . .


Tuesday, June 30, 2009

New Florida Residents

Residency & Domicile

Perhaps you recently moved to Florida, perhaps you’ve had a residence in Florida for years, but recently have decided to change your domicile from your former Northern state (New York, Pennsylvania, Massachusetts, New Jersey, etc) to Florida  – what do you need to do in order to change your domicile so that you can avoid your “former” Northern state’s taxing regime?


Read more . . .


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