Perhaps more than ever before, the estate tax has been making news lately. And, the reason for this, of course, is that 2010 is the year in which the federal estate tax is non-existent. For whatever reason, the tax code was written so that a gap in the estate tax would arise in 2010 and last until 2011, when the tax is set to once again take effect. This quirk in the tax code won’t affect the vast majority of Americans, as the estate tax only applies to estates valued at over $3.5 million. But, to families who are susceptible to the estate tax, the gap in the tax code could save them substantial sums of money, as the estate tax takes up to 45% of an estate.
Unless Congress enacts a retroactive estate tax, those with larger estates who pass away in 2010 will never be required to pay. One would expect taxpayers to welcome this tax break with warm reception – particularly wealthy taxpayers. But, as a recent story on National Public Radio pointed out, even some of America’s wealthiest Americans are vehemently opposed to the gap in the estate tax. Abigail Disney, Warren Buffet and Robert Rubin are among those wealthy Americans who have voiced their concerns about the tax gap.
Supporters of the estate tax say that the good fortune of being born into prosperity should not endow an individual with the inheritance of a dynasty. On the other side of the debate, those who oppose the estate tax say that this heavy burden can sink small businesses that would otherwise pass from one generation to the next. Both sides have valid points, so it will be interesting to see how it all plays out.
In the mean time, personal representatives need to know a bit about the situation, as paying estate taxes can be a big part of keeping with Arizona probate law. When charged with the responsibility of administering an estate, personal representatives must maintain certain duties and obligations, one of which is paying estate taxes. Because Arizona does not have an estate tax, this duty consists of paying the federal estate tax. So while personal representatives are presently relieved of this obligation, AZ probate law will require them to act in accordance with federal law if and when the estate tax is reinstated.