Estate and Gift Tax Reform

Issue

Proposals to reform the federal wealth transfer tax system.

Position Statement

ABA strongly urges Congress to enact legislative reforms of the federal wealth transfer tax system. In particular, ABA supports making permanent the reforms created under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). EGTRRA steadily increases the estate and gift tax applicable exclusion amounts and the generation-skipping transfer exemption amount from 2001 to 2009, leading to a complete repeal in 2010. In addition, for 2010 alone, heirs will take on the carryover basis of the assets inherited, as opposed to receiving step-up basis. Carryover basis is known to be very difficult for heirs and trustees to administer. However, in 2011, estate and generation-skipping taxes will revert to the much higher tax rates and lower exemption level that existed before EGTRRA. 

ABA has been involved in estate and gift tax reform efforts for many years. In 2004, the ABA Trust Taxation Committee, in collaboration with the American Bar Association, American College of Tax Counsel, American Institute of Certified Public Accountants, and the American College of Trust and Estate Counsel, issued a report containing expert analysis of changes enacted by EGTTRA regarding federal wealth transfer taxes. 

Explanation

The estate tax is an inefficient and complicated tax that discourages work and personal savings in favor of consumption. High estate taxes not only affect the very wealthy, but also burden families with small businesses or farms. Estate tax also leads to unfair double taxation when inherited wealth has been taxed as income during the life of the decedent.

When EGTRRA's changes sunset in 2011, estate tax rates will revert to the higher rate of 55 percent with a lower exemption amount of $1 million. ABA opposes the sunseting of these important provisions.

Contact for further information: Phoebe Papageorgiou (202) 663-5053.