Founded in 1993, The Cobb Community Foundation (CCF) is a philanthropic foundation through which individuals, families, organizations and corporations, support the well-being of our community. As a nonprofit 501(c)(3) organization, CCF invests in solutions to solve Cobb County’s civic, educational, health, human service, and cultural challenges.

What’s Going On with Estate & Tax Laws?

Thomas H. Rogers, III • Brock, Clay, Calhoun & Rogers • 2006 CCF Board Chair

This is a uniquely uncertain time in the history of the estate and gift tax. As always, everyone should remain vigilant in reviewing the law, and work closely with their estate planning professionals to ensure that estate planning goals are achieved and that no un-intended consequences result.
Over the last several years, the Economic Growth and Tax Relief Reconciliation Act of of 2001 left our estate and gift tax laws a muddled mess. For years we have expected Congress to step up and resolve the uncertainties. Congress has failed to do so, and as a result of its inaction, we now find ourselves living in a country which—at least momentarily and theoretically—has no estate tax. However this state of affairs is not cause for celebration or even complacency.
The estate tax repeal, if it sticks at all, is temporary and will last for only one year at best. Congress may act this year to reinstate the tax immediately and might even attempt to reinstate it retroactively to January 1, 2010. If Congress does not act at all this year (which is a distinct possibility) then on January 1, 2011 the estate tax returns in all its pre-2001 glory—meaning a transfer tax exemption of only $1,000,000 and a 55% tax rate. Moreover, even during this era of “repeal,” there is a trade-off in the form of potential income taxes, since inherited property will have an income tax basis equal to the lesser of its fair market value on the date of the decedent’s death or the decedent’s tax basis.
It is important to be particularly aware that many estate plans which were designed to avoid estate taxes will not work at all as intended if there actually is no estate tax. In some cases, spouses or other beneficiaries could be unintentionally disinherited. With this current environment, we urge everyone to review and update their estate plan as needed, and to keep a close watch on what Congress does next on this legislation.