Wednesday, November 10, 2010

Houston Estate Tax Lawyer Talks 2010 Election Results ... and Your Finances

As a Houston estate tax lawyer, I can say change came back to Washington last week, and, depending on your politics, you may still be basking in the afterglow--or fighting back depression.

But based on pre- and post-election statements, we can make a few educated guesses about what it all means for the taxes YOU will be paying starting next year, as well as other financial implications.

I hasten to add that this is (educated) prediction-making, and that I certainly do not have the time (nor do you) to provide a fully-exhaustive list of how you may be affected. But that said, I as a Houston estate tax lawyer,  have been watching these sort of policy fluctuations for a while...

The "Bush Tax Cuts"
This is going to be the battle to watch, but with the political winds at their back, the Republicans seem to be indicating that they will be pushing hard to extend these tax reductions (from 2001 and 2003), at least for another year.

What makes this most likely is that President Obama seems to agree with them (http://news.yahoo.com/s/ap/20101105/ap_on_bi_ge/us_obama_taxes).

What does this all mean? A few things come to mind...

Capital Gains & Dividends Taxes Likely To Stay Lower
If the "Bush tax cuts" are indeed extended, the tax rate on profits from the sale of long-term assets should stay at 15 percent, even for folks in the upper income tax brackets. And investors whose income is in the 10 percent or 15 percent bracket won't owe any capital gains taxes.

And, as for dividends, under the current tax law, qualified dividend income is taxed the same as long-term capital gains (that is, at a maximum tax rate of 15 percent). Similarly, those in the two lower income tax brackets received certain dividends tax-free.

Without special treatment, dividends would be treated as ordinary income, meaning they could be taxed at the top marginal tax rate, currently 35 percent (or as high as 39.6 percent in 2011 if the tax cuts expire).

But again, that doesn't seem to be what will happen.

Tax Brackets on Ordinary Income
Without Congressional action and presidential approval, the current tax rate brackets of 10, 15, 25, 28, 33, and 35 percent would be replaced in 2011 by the "pre-Bush" brackets of 15, 28, 31, 36, and 39.6 percent. Which, of course, would mean across-the-board rate hikes for American taxpayers.

And though I could be wrong, it is looking good that these lower rates would be retained.

The Estate Tax
You would think that this issue would have become easier to predict, but I regret to say that the outlook remains chaotic.  It is unclear what a fix would be (if any), and whether it would happen as part of an income-tax compromise. There is sentiment, apparently, on the Hill for providing estates of people who died this year a retroactive choice of which tax rules to use.

If you are the heir or executor of someone who died in 2010, we can help you determine whether using 2010 rules is best. It may not be for those with assets between about $1.3 million and $4 million, because of complex rules levying taxes on heirs when assets are sold.

All This Being Said...
There is nothing better than sitting down with someone who will look at YOUR specific situation. Because no matter what Congress does, your estate must be handled with the sensitivity and competency to weather the storm of any future tax changes. Which, of course, is what we have been doing all year.

 So, to make that an easier move to make...

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$750.00 Towards YOUR Family Wealth Plan Audit
Special Gift Certificate
From Kimberly Hegwood
(281-218-0880)
Print This Email, and bring it to our office to claim your $750 credit towards a Lifetime Legacy Plan Audit (normally $950)

Expires November 17th, 2010
Not valid with any other offer
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Warmly,

Kimberly Hegwood