Heroic Investing
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Still making mistakes when you’re dead?

HeroicInvesting.comRetroactive estate taxes from beyond the grave? Sounds like a bad Sci Fi movie.

But we can always rely on our lovable politicians in Washington D.C. to toss the certainty of anything, even death and taxes, up into the air. At the end of 2009, a federal estate tax that has been around since 1916 elapsed. Yippee skippee, right? Not so fast. If there’s one thing we can be sure of, it’s that our fearless leaders will regroup sometime this year or next and work out a way to put the tax back on the books. After all, that’s what they do – tax us when possible – it’s in the job description.

But this current limbo is a particularly vexing time for financial advisers and first responders trying to prepare their estate for survivors. Right now, some consultants are advising clients to prepare for both eventualities – literally create two sets of wills, etc.

Here’s a little history. Back in 2001, President Bush signed a big tax reform law that reduced estate taxes each year until, in 2009, estates worth more than $3.5 million were taxed at a 45% rate, down from the 55% it had been. The law repealed the tax entirely in 2010, but that expires next year, sending estate taxes back to the pre-2001 level. Excited about that prospect? We’re not.

There are a couple of big issues to be aware of. First, will Congress pass a new law setting rates for 2011 and on? More importantly, will it be retroactive to bequests made this year, 2010, when there is no law on the books at all? Ay yi yi…it makes our heads hurt to think about it.

For now, no definitive advice one way or the other except – stay tuned. It’s bound to get interesting.

The Heroic Investing Team


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