California Estate Planning Blog by Kevin Staker

December 31, 2012

Latest Word: Estate Tax Law to Remain As Is But With 40 percent Top Rate

Exemptions and all else as the law is now, in 2012, but with top rate going to 40 percent. What a coup for the Republicans!. Reported by JULIE PACE and BEN FELLER at Associated Press: See

On the other hand, CNN reporting no deal as of 1:01 pm eastern.  See

We shall see.

Kevin Staker

Estate Tax New Blog


Estate Tax Is One of the “Sticking Points” Preventing Avoidance of “Fiscal Cliff”

Multiple media sources report the estate tax issue is one of the remaining issues preventing avoidance of the Fiscal Cliff. It appears the most important issue, the income level at which the Bush Tax Cuts will not be extended, will be settled at $400,000 for a single person and $500,000 for a couple. That about splits the difference on the positions of the two sides.

The major remaining issues are the Republicans want to extend the present estate tax exemption, $5,120,000, and rate, 35 percent, and the Democrats want $3,500,000 and 45 percent (the 2009 law). On the other hand, the Democrats want to extend long term unemployment benefits, and the Republicans oppose such as a luxury we cannot afford.

Bloomberg reports the estate tax is still a major issue.  See

However, ABC News reports they have already agreed to the Republican position.  See

The Washington Post has a good, concise explanation of what is involved in the estate tax issue.   See

Z. Byron Wolf and Sarah Parnass at ABC News are keeping an excellent live update of what is going on.  See

I predict each side will capitulate and give the other what they want. This is want happened at the end of 2010.

We shall see.

Kevin Staker
Estate Tax News Blog

December 29, 2012

Estate Tax Reportedly Important Part of Fiscal Cliff Negotiations

Several sources report the estate tax is an important part of the Fiscal Cliff negotiations.

Ted Barrett and Greg Botelho, at CNN report the following:

Democrats believe Republicans should make the “first move” — basically by saying what changes should be made to the president’s proposal, which calls for tax rates to stay the same for all annual family income below $250,000. The expectation is that Republicans will try to raise that income threshold to $400,000 and push to keep estate taxes low; Democrats said they might be open to one such scenario, but not both.


Lisa Mascaro and Kathleen Hennessey at the L. A. Times report:

One key aim for negotiators is to find an income threshold that could draw enough Republican support for Boehner to win over a majority of his caucus — 120 members — while attracting the remaining Democrats needed for passage. Boehner has resisted bringing a bill to the floor without the support of most House Republicans.

Another point of contention has been the level for estate taxes. Republicans want to keep the current 35% tax rate on estates worth more than $5 million. Many Democrats want a 45% rate on estates worth more than $3.5 million. If Congress does not act, the tax automatically reverts to its 1990s level of 55% on estates worth more than $1 million.

“There are certain things in which you begin losing a lot of real votes quickly, including mine — and fussing with the estate tax is one of them,” said retiring Sen. Jon Kyl of Arizona, the second-ranking Senate Republican.


Manu Raju also reports the leaders of the two parties in the Senate, Reid and McConnell, have the estate tax as one of the issues they will try to resolve.  See

Jared Bernstein at the Huffington Post reports the same at

David Welna at NPR reports that Senate Majority Leader, Democrat, Harry Reid would propose a bill to avoid the Fiscal Cliff:

That legislation would extend expiring tax cuts only for household income below $250,000 and include other unspecified provisions that Reid said the president wanted; among them is likely an extension of emergency unemployment benefits that would otherwise expire.

Reid indicated he was willing to see that bill changed in negotiations with McConnell. Republicans want tax cuts extended for income higher than $250,000, they want no increase in the estate tax, and they do not want the top tax rate to go back up near 40 percent.


Dan Weil at Newsmax confirms my prior comment that several Democratic senators are in favor of extending the present estate and related exemptions of over $5,000,000. See

I repeat my prediction.  The Republicans care more about the estate tax than the Democrats.  When this is settled and it will be settled, it is only a matter of time, the President will get an increase in tax rates on some higher income folk and the Republicans will get an extension of the present estate and related tax laws (with maybe only a $1,000,000 gift tax exemption).

A report at Associated Press by David Espo and Jim Kuhnhenn confirms my view:

Democrats said Obama was sticking to his campaign call for increases above $250,000 in annual income, even though in recent negotiations he said he could accept $400,000.

The two sides also confronted a divide over estate taxes.

Obama favors a higher tax than is currently in effect, but one senior Republican, Sen. Jon Kyl of Arizona, said he’s “totally dead set” against it. Speaking of fellow GOP lawmakers, he said they harbor more opposition to an increase in the estate tax than to letting taxes on income and investments rise at upper levels.


Note, Senator Kyl was the driving force the last go around in December 2010 behind our present high estate tax exemption and other provisions of the law favorable to wealthy taxpayers.  He may be retiring but he is still the Senate Republican Whip, a very powerful participant in the negotiations going on in the U.S. Senate as I write this post.  Just watch, he will get almost all he wants.

We shall see.

Kevin Staker

Estate Tax News Blog

December 28, 2012

Update: Movement in Congress Appears to Be In Favor of Extension of Present Estate Tax Law

Extending the present exemptions for the estate and related taxes seems to be the current trend in Congress.  Justin Sink at the Hill reports the following:

Some Republicans have suggested a compromise might be found in allowing Bush-era tax rates to rise only on annual incomes above $400,000. Talk of a “mini-plan” that would include an extension of current tax rates under $400,000 along with an extension of the current estate tax rate swept through the Capitol on Friday.

The article is at

On the other hand, it is appearing likely I was wrong in predicting they would pass the Middle Class Tax Cut Act at the last minute.  However, we are not at the last minute yet so

We shall see.

Kevin Staker

Estate Tax News Blog



Finally, Someone is Paying Attention to the Estate Tax Amid the Fiscal Cliff

Andrew Bolton at the Hill has an excellent article on the status of the negotiations among the Republicans and Democrats in Congress along with President Obama. He actually views the estate tax as a key in the negotiations. See

Bolton reports that it appears the Republicans might accept the cut off for extension of the Bush income tax cuts at $500,000 if the present (as of 2012) law on the estate tax is continued.  The current law is $5,120,000 exemptions (estate, gift and GS tax) with a 35 percent top rate.  He on the other hand reports the liberal Democrats would squawk about continuing such a generous level.   However, he also points out many farm state Democratic lawmakers would favor high exemptions.

We shall see.
Kevin Staker
Estate Tax News Blog

December 26, 2012

Estate Tax “Cliff” Given Little Attention

I track this every day.  Almost no one of substance in the news media is talking about the estate tax aspect of the Fiscal Cliff.

The only exception is an article by Bernie Becker and Peter Schroeder at the Hill.  See

Google “estate tax” in Google News if you wish to see for yourself.

I continue to predict the House will pass the Middle Class Tax Cut Act by the 31st. If not, the Congress will pass something similar very early in January so the Tea Part folk can say they did not vote to raise anyone’s taxes, just cut

We shall see

Kevin Staker
Estate Tax New Blog

December 21, 2012

Not Much to Report – Looks Like My Prediction on the Estate Tax Has a Higher Probability Now

Amazing how Mr. Boehner failed to count his own votes before he proposed his “Plan B”. Plan B was just a political stunt so the Republicans could say they wanted to keep nearly everyone’s taxes low. He failed.

I believe the most likely scenario is that the House will adopt the Middle Class Tax Cut Act before the end of the year. The Senate will not have enough time to pass anything new.

Ironically, it will be with all the Democrats voting in favor and enough Republicans to get a majority. (Most Republicans will vote no so they do not give ammunitiion to a Tea Party opponent in their next primary (See the fate of former Senator Bennett from Utah).

Hence, President Obama will have won the battle. Gotten his way without any concession to the Republicans. Pretty Amazing. Horrible negotiating by the Republicans.

The Act does not address the estate tax issue. Hence, we would go back to $1,000,000 exemptions. However, I do believe some time in 2013, when the Republicans do force some entitlement reductions, the exemptions will be retroactively (to Jan. 1) increased to $3,500,000 to even over $5,120,000.

We shall see.
Kevin Staker
Estate Tax News Blog

December 18, 2012

Boehner “Plan B” Apparently Has an Estate Tax “Patch”

What that is we do not know. I assume continue the 2012 law of a $5,120,000 estate tax exemption. See article at Politico by JAKE SHERMAN and JOHN BRESNAHAN. See

Dana Bash and Tom Cohen at CNN confirm the report.  See

We shall see.
Kevin Staker
Estate Tax New Blog

Bloomberg Reports Obama Has Included the Estate Tax in His Latest Offer

Roxana Tiron & Hans Nichols at Bloomberg News report the President has included his proposal to return the estate tax exemption back to the 2009 level, a $3,500,000 exemption and 45 percent top rate. See

One assumes he has proposed simply going back to the 2009 law.  This, hence, would also include the $3,500,000 being the exemption also for the gift tax and the generation skipping transfer tax.

On the other hand, the Republicans care much more about these taxes than the Democrats do.  Therefore, in a settlement I would guess we would end up with the law as it is in 2012.  However, the President may have learned to negotiate by now and could make the $3,500,000 stick if he wanted to.  He is in the power position.

Notwithstanding, I still believe they may  not reach a deal before Dec. 31 and so the House Republicans would give up at the last day and pass the Middle Class Tax Cut Act already passed by the Senate.

If I were Boehner I would offer take the $400,000 level for the tax rates and see whatever entitlement reform and other concessions he can get out of the President.  Otherwise, if the “go over the cliff” on January 1st the President will end up getting his $250,000 level.  The Republicans will then be under tremendous pressure from 98 percent of their constituents.

However, I would take one last shot at it if I were Boehner: offer to settle on $500,000 as the income level if the President drops the unemployment extension and gives a bit more on entitlements.  Actually come to think of it, that is probably what they will settle on today or tomorrow.

Please note, the Bloomberg article is the only article I can find that mentions the estate tax in relation to the fiscal cliff negotiations as of today.  The exceptions are two articles that I believe erroneously report the President’s latest offer includes only a $1,000,000 exemption.  I find them not credible.  The President has talked of the $3,500,000 since 2007.

We shall see.

Kevin Staker

Estate Tax News Blog

December 12, 2012

Prediction: Republicans Will Cave and Pass the Middle Class Tax Cut Act

My prior post appears to be correct. See the great article in Politico by By MANU RAJU and JAKE SHERMAN,

The President in asking for too much in concessions from the Republicans. They however know it is political suicide to stick to their guns and allow the Bush Tax Cuts to expire for everyone. They will wait to fight the fight over entitlements next year when the debt ceiling issue arises. The Middle Class Tax Cut Act has already been passed by the Senate. I predict the House will pass before the start of 2013.

This is all very sad. The President has the opportunity to reach the “Grand Bargain” with the Republicans and save ourselves from our own living beyond our means. The Republicans could have gotten something in exchange for the inevitable increase in tax rates on the wealthy. For once, the President has been a tough negotiator but he is failing to step beyond and be a great president.

What are they really arguing about? Evan Soltas  at Bloomberg states the following:

Looking more closely at the cost of the income-tax provisions in 2013, the cuts to upper-income brackets are worth $52 billion, to middle-income brackets $84 billion, and to lower-income brackets $55 billion, according to an Economic Policy Institute study. Over the long term, allowing the 2001 tax cuts on upper-income-tax brackets to expire may increase revenue by $297 billion over the next five years and $824 billion over the next 10, according to the Congressional Budget Office.  (see

So The Republicans and the President are really arguing over only $52 billion next year.  A drop in the bucket in relation to another $1 trillion deficit.

And the estate tax? An orphaned step child. I predict there will be no agreement before 2013. However, when they do settle the debt ceiling increase, it will be part of that settlement and will be retroactive. However, hard to predict whether the estate tax exemption will be the $3,500,000.or the $5,120,000 adjusted for inflation. However, I believe the gift tax exemption will go down to $1,000,000.

We shall see

Kevin Staker
Estate Tax News Blog

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