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What Estate Tax Repeal Means For Most Taxpayers: Not Much

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JUNE 11, 2001 VOLUME 8, NUMBER 50

On June 7, 2001, President George W. Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001. Despite extensive media coverage of tax reform, and especially of estate tax repeal, over the past six months, you may have been left wondering what it means. It turns out that it doesn’t mean much for most of us.

Estate tax repeal will have one of two effects for most people. For some, the change in tax laws will mean they must spend more on lawyer’s fees for changes to their estate plans—and may have to make more than one set of changes as the rules slowly shift over the next decade. For most people, however, the principal effect of estate tax repeal will be felt when government revenue must be raised from some other source—possibly including taxes on middle class citizens who wouldn’t have paid estate taxes under the old rules.

There are four elements of estate tax repeal that make it difficult to predict exactly what will happen over upcoming months and years:

Reductions in the estate tax will be phased in over a ten-year period, with relatively little change before full repeal. The current $675,000 exemption from federal estate tax liability is raised to $1 million next year and then increases slowly, but it only reaches $3.5 million before repeal.
The top tax rate drops slightly each year, from the current 55% to 45% in the year before the tax is finally eliminated.
Upon repeal of the estate tax, a new system of taxation is imposed—heirs will pay income taxes on capital gains when they sell inherited property. There will, however, be a substantial exclusion from this new tax—$1,300,000 of gain for every decedent’s estate, and another $3,000,000 of gain for surviving spouses.
Estate tax repeal is itself repealed in 2011.

That’s right: as currently written, the law ending the estate tax in 2010 ends (and the estate tax returns) in 2011. Authors of the tax repeal measure insist that they only included that provision in order to “balance” the budget for the next decade, but real estate tax repeal will require another Congress and President to sign another bill sometime in the next decade.

The new law eventually eliminates the “generation-skipping” tax, which penalized transfers to grandchildren (although a $1 million exemption makes the penalty less onerous). The gift tax, however, remains in effect—to keep taxpayers from giving their property to terminally ill family members expecting to get the property back within a few years.

Meanwhile, no one dares predict how federal estate tax “repeal” will affect state governments, where the estate tax has been a major source of revenue for decades. Arizona, for example, received about $80 million from the state estate tax last year. The federal credit for payment of state taxes will be phased out starting in 2002, so that the effect of estate tax reductions will be smaller—unless states follow the federal governments’ lead.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.