Hiersekorn Law Firm Blog

The IRS has finally admitted that the Spanish-American War is over.  See, it turns out that we've all been paying a 3 percent excise tax on our long distance telephone bills that was put in place to help pay for the Spanish-American War.

As often happens, the justification for the tax went away, but the tax itself didn't.  After a string of courts ruled that the tax was invalid, the IRS finally announced that it would stop collecting the tax.

Even better, we're all entitled to a refund of all long distance taxes paid since February 2003.  You can claim the refund on your 2006 income tax return.  The total amount refunded is expected to be around $13 Billion.  No doubt, the majority of that will go to houses with teenagers.

In the last issue of The Exit Planning Review™, we introduced you to what Family Business Consultants are and what role they play in dealing with the emotional and behavioral issues associated with family business transfers. We also looked at how the role of the Family Business Consultant is like that of the Panama Canal pilot captain.  Your business advisors help you navigate the vast ocean of topics such as estate, wealth, and business planning opportunities.  When it comes time to go through the tough areas such as the family dynamics (emotional and behavioral issues) that inevitably arise when any type of change threatens to occur (leadership, control, succession, wealth transfer, etc.), family business consultants help you, your family and your advisory team navigate the nuances of the special passage way, rather than suffer through the otherwise long tumultuous journey around the problem.

This weekend is Veterans Day, and I would like to extend a hearty thank you to everyone who has ever served in the U.S. military.  As a veteran myself, I know the sacrifice that goes with military service. 

And I would be remiss if I didn't pass on my happy birthday wishes to all the present and former Marines out there.  In honor of the first Marines at Tun Tavern, please join me in lifting an ale this weekend and celebrating the birth of modern-day American knighthood.  Semper Fidelis, my brothers.

The election results are in, and the Democrats are going to be in charge of the House.  Final results in the Senate aren't in yet, but it's clear that the Democrats will have a stronger, if not dominant, voice in the Senate as well.

What's not yet clear is the impact of the elections on the estate tax.  At least for now, I think it's safe to say that repeal is off the table.  That would require Democrats to make repeal their issue, and that's just not realistic.

If I had to guess right now, I would think that we will see Democrats put forward a bill in 2008 to freeze the exemption amount at $3.5 million to prevent the "temporary repeal" in 2010.  That would be a politically-expedient solution that could garner enough votes to pass.  The Democrats' constituency would be happy that the temporary repeal would be prevented, and the Republicans would be able to avoid the unpleasant reversion to the pre-2001 $1 million exemption.

Another variant on this approach would see a freeze of the exemption at $2 million.  However, that would involve putting the estate tax on the agenda for the first session of the new Congress.  That would be a political risk for the Democrats, and I don't think it would be likely.  (Although, it would be more likely if the Democrats could get a Republican quid pro quo in return.)

Further, I think that some sort of inflation index is more likely with Democrats in charge, because it will take the issue out of play in future years if Republicans regain control of the Congress.  And, finally, I think "portability" is likely regardless of which party controls.  Portability would permit a surviving spouse to use a deceased spouse's estate exemption without the use of a bypass trust.  This change would have more impact on estate planning law and techniques than any change in the exemption amount.