Posted on January 4, 2010 by Angelo Tartaro

Reversal of Fortune: The Estate Tax Law Update

As of January 1, the federal estate tax went away for a year. Under current law, it’s scheduled to return at a higher rate next year. Personally, I’m surprised that Congress allowed the estate tax law to lapse, and I'm curious to see the ramifications.

According to the Wall Street Journal, families facing end-of-life decisions in the immediate future are finding that the change is making one of life's most trying episodes only more complex. Beneficiaries stand to inherit a lot more for a death this year than a death after December 31, 2010. The ethical dilemma is clearly significant.

Of course, what Congress giveth, Congress can taketh away. As discussed in the Journal article, the repeal of the federal estate tax is accompanied by reinstatement of the capital gains tax on property passing to beneficiaries.  Previously, when property passed to beneficiaries, the property received a “step up” in basis, wiping out the capital gains tax. The net result is that many estates, including smaller estates, will be taxed anyway but it just won’t be called an estate tax.

The Journal says that the uncertainties of the new tax law (will it be changed? will it be retroactive?) are “forcing family legal advisers to craft various provisional financial-planning strategies that can be undone later if the rules do change.” According to the article, at least one person has added the prospect of euthanasia to his estate-planning mix.  That might be a little extreme.

For a more conventional planning environment, we look forward to some kind of retroactive resolution.
                                                                

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Posted on December 22, 2009 by Angelo Tartaro

Update: COBRA Subsidy Extension

According to Workforce Management, on December 19, Congress approved -- and the President signed -- a military spending bill that includes the extension of federal COBRA health insurance premium subsidies for unemployed workers.

The article states that the legislation will provide another six months of subsidized coverage for beneficiaries whose nine-month COBRA 65% premium subsidy has run out. It also gives beneficiaries whose subsidy expired and who didn’t pay the full premium the opportunity to receive retroactive coverage. The legislation also requires employers to notify current and future COBRA beneficiaries of the new 15-month premium subsidy.

COBRA is simple in concept but complex in implementation. More information can be found on the Department of Labor website, and of course, you can consult a professional.

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Posted on July 30, 2009 by Beverley Rogers

The Federal Stimulus & The Local Grocer: ECON 101

The students at Barlow Mountain and Scotland Elementary Schools don’t use the water fountains – they drink bottled water.


This is not a personal choice, this is a necessity which stems from the fact that chloride levels in the school’s water supply exceed state health standards. Fortunately, however, Ridgefield is on the short list to receive federal stimulus money to cover more than half of $1.45 million North Street water main project.


Ridgefield’s Weir Farm is also benefiting from the federal stimulus funds. The park just received $457,000 in federal stimulus money to help complete three projects.


These stimulus items remind me of the “multiplier effect,” one of the fundamentals of macro-economics. The concept is that any money spent on stimulus has to circulate, and how often or how quickly it circulates (the “multiplier”) determines how effective it is in stimulating the economy.

 
For example, Ridgefield gets money and pays contractors for the waterworks. In turn, they hire employees or subcontractors. That help goes out and buys groceries. The grocer hires additional help. And so on.  Every time a dollar changes hands in an economic transaction, it adds to our "Gross Domestic Product," the measure of our domestic economy.


Reasonable minds can and do differ about what kinds of spending have better multipliers or whether tax cuts are a better multiplier than outright spending. The bottom line for any small business is that the process of circulation takes time, so we have to accept that the changes to our practice or business will also take time.
 

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