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Tuesday, January 8, 2013

Zelinsky: Responsible Wealth Should Oppose the GST Grandfather Exemption

Edward Zelinsky (Cardozo), Responsible Wealth Should Oppose the GST Grandfather Exemption:

In the American Taxpayer Relief Act of 2012, Congress and President Obama recently agreed that the federal estate tax will be imposed at a 40% rate on estates over $5,000,000. On 11 December 2012, a group of affluent Americans, organized under the banner of Responsible Wealth, had called for a stronger federal estate tax. In particular, Responsible Wealth urged that federal estate taxation begin at a rate of 45% on estates over $4,000,000.

Neither the American Taxpayer Relief Act nor the Responsible Wealth statement addressed a particularly egregious loophole of federal transfer taxation, namely, the grandfather exemption of the generation skipping tax (GST). Under this exemption, the GST does not apply to trusts established before 25 September 1985. By virtue of this GST exemption, older wealth is immunized from federal transfer taxation while otherwise equivalent new wealth is taxed under the estate tax.

Because Responsible Wealth includes heirs to older fortunes, such as Dr. Richard Rockefeller and Dr. Abigail Disney, Responsible Wealth is uniquely positioned to address this unfairness of the federal tax statute. As part of its self-proclaimed mission to strengthen the federal estate tax, Responsible Wealth should lead the effort to repeal the GST grandfather exemption and thereby subject old wealth to the same transfer taxation as new wealth. ...

Whatever the policy merits or political need for the GST grandfather exemption in 1986, it has outlived its usefulness. If new, i.e., post-1985, wealth is to be subject to estate taxation once every generation along the lines recently adopted by Congress and advocated by Responsible Wealth, older wealth should be subject to such taxation also. The members of Responsible Wealth who benefit from the GST grandfather exemption are uniquely positioned to call for the abolition of the exemption from which they and their families unfairly benefit. They should do so.

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Comments

I want to see their wills & trusts. Them first. Cut the check to Uncle Sam. How much have they avoided by giving to charity?

Posted by: Sandy P. | Jan 8, 2013 9:47:52 AM