ND1222094

Title: Estate Tax Gap Could Result In Lawsuits

Description: Congress?s failure to fill a one-year gap in the estate tax could result in serious litigation over inheritances, according to tax experts.

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WASHINGTON ? Extensive litigation is expected surrounding the suspension of the estate tax ? set to be eliminated on January 1 ? followed by its reinstatement in 2011 at the rate of 55 percent, The Hill reports.

While the House has approved legislation to extend the estate tax at a rate of 45 percent through 2010, the Senate has not approved the move, as most Republicans have sought to eliminate the tax. However,

Senate Finance Committee Chairman Max Baucus said that he will try to extend retroactively the tax when the Senate returns to Washington next year.

The retroactive extension is at the heart of the litigation speculation, as deaths, trust terminations, and trust distributions will occur in the interim, according to Deloitte Tax.

Given the amount of money, ?it?s almost certain that people will litigate,? said Clint Stretch, a tax expert at Deloitte.

Proponents of the estate tax, noting the conflict, are urging the Senate to take action ? and quickly.

?Repeal of any weakening of the tax would result in significant loss of revenue for vital public programs and infrastructure, and would benefit only the largest one in 500 estates that are subject to the tax at its current level,? said Americans for a Fair Estate Tax, which sent a letter last week to senators.

Only estates larger than $7 million per couple or $3.5 million for individuals are subject to the estate tax. Democrats predict that those under that threshold will incur a higher capital gains tax because of Congress? inaction.�

?The people that are most likely to be hurt by this are the people who have an estate between $1.3 million and $7 million,? said Lee Faris, of United for a Fair Economy, which wants to extend the estate tax.

In addition to the estate tax expiring in 2010, the generation-skipping transfer (GST) will also be lost for one year, which is projected to ?have a huge impact? on wealth transfer.

The Congressional Budget Office predicts estate tax receipts to be virtually eliminated in 2011 before increasing to $32 billion in 2012.

Click here for more on the estate tax.

Content Subject: Government Relations

Formatted Article Date: December 22, 2009

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