Attorney Urges Congress to Repeal Carryover Basis Rule
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Subject: Estate Tax — First Bipartisan Step Chairman Baucus and Ranking Member Grassley: While there is a stalemate over the estate tax exemption and rates,
I urge that now as a bipartisan act that the Congress repeal 2010's
modified carryover basis rules retroactively to January 1, 2010.
At the Senate Finance Committee Estate Tax Revision hearing on
November 14, 2007, I was the only estate-planning lawyer. The three
other witnesses were a businessman from Iowa, a rancher from Nevada and
an oracle from Omaha. They discussed whether or not there should be an
estate tax and if so what the exemption and rate should be. My charge as the estate-planning lawyer on the panel was to tell how
I and my law firm have dealt and are dealing with the complexity of
changing exemptions and rates since EGTRA’s enactment, estate-tax
interruptus in 2010 (but with a gift tax and modified carryover basis)
and the return of the estate tax in 2011 and beyond with a $1 million
exemption and a 55% rate (60% for part of some larger estates). I told
how we use formula clauses, disclaimers and contingency planning — and
how complicated all this has become. Virtually every member of the
Committee decried the complexity of the roller-coaster exemptions and
the uncertainty it created for their constituents. Current stalemate. Now for the Read and Blue Bipartisan Agreement on modified carryover basis. Many assets will have to be sold — and a tax incurred — to assure
that funds will be available to pay the estate tax if it is reinstated
(whether retroactively or prospectively). Prudent Investor laws require
sales in many cases to provide diversification of an estate’s assets. Apart from the foregoing, most wills (not anticipating that Congress
would fail to act) have given no instructions to executors on how to
allocate assets to avail beneficiaries of the $1.3 million step up for
all heirs and the additional $3 million step up for assets bequeathed
to a surviving spouse. The law is unclear on the procedure to be
followed if the assets pass under a living trust, intestacy or for a
surviving joint owner. It is highly likely that when the Congress finally acts on the
estate tax, it will repeal carryover basis. Chairman Baucus has said
that estate tax legislation would be retroactive. What that legislation
will be — as far as the exemption and rates — I can’t guess. But again,
it seems virtually certain that carryover basis will be repealed. So why not repeal carryover basis now (retroactively to January 1,
2010) while the Red and the Blue continue their chess match over the
exemption and the rates. In my travels around the country, Americans are still cheering for
the Red, White and Blue. Why not take a first bipartisan step and
repeal carryover basis and give them some reason to once again cheer
the Red and the Blue. This letter represents my personal views and does not represent the
official view of my law firm or any organization to which I belong. No
client has engaged me to make these comments to you. Respectfully, Conrad Teitell cc: Jonathan Selib, Tiffany Smith, Theresa Patara
Conrad Teitell
Chairman, Charitable Planning Group
Cummings & Lockwood LLC
Six Landmark Square
Stamford, CT 06901
Phone: 203-351-4164
Right Fax: 203-708-3840
Admitted in NY and DC
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