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Elder Law Center One Essex Street Saugus, Massachusetts 01906 Telephone 781.233.4444 Fax 781.231.2222
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August 11, 2005
“THE PARIS HILTON BENEFIT ACT”
The rich get richer, the poor don’t have anything, and the middle class gets whacked. That’s the message that I am getting from President Bush. On one hand our legislators are crying about the skyrocketing costs of nursing homes and health care and on the other hand they are voting on repealing the estate tax, a tax that only millionaires have to pay. Before I get into this discussion I would like to inform you that there is no news to report regarding the numerous bills that have been filed in the Legislature this year concerning the finances of elders. I have recently volunteered to appear as an “expert” in some meetings that the Massachusetts Chapter of the National Academy of Elder Law Attorney’s has planned with our federal Legislators. You should be aware that many possible changes have been discussed at the federal level for the Medicaid program. Now, back to Paris Hilton. Senate Majority Leader Bill Frist, a Republican from Tennessee, and formerly a cardiac surgeon at Massachusetts General Hospital, has postponed a vote on the repeal of the estate tax until September. The Death Tax Repeal Permanency Act of 2005 if passed would permanently repeal the estate tax. The delay until September for the vote to repeal the estate tax is designed to give more time to the Republicans and Democrats to work out some kind of compromise. Back in 2001 the federal government passed a large tax cut. Included in that tax act was the repeal of the estate tax. One of the provisions of that tax act said that in the year 2010, the estate tax would be repealed. It also said that in order for it to become a permanent repeal, another vote would have to take place. If this second vote, now scheduled to take place in September, does not repeal the estate tax, the estate tax will come back in the year 2011. The estate tax only applies to rich people. The repeal of this tax has been dubbed, “The Paris Hilton Benefit Act”. For anyone who dies in the year 2005, they will only pay an estate tax if their estate is worth over $1,500,000. For years 2006, 2007 and 2008 it is scheduled to increase to $2,000,000 and for the year 2009 it is scheduled to be increased to $3,500,000. Each year as the limit goes up, fewer and fewer people become subject to this tax. With proper planning married couples may own twice the amount of these limits and still pay no estate tax. Let’s see how this would affect Paris Hilton; Example: Let’s assume that on the last of Paris Hilton’s parents death, their estate is worth $28 million dollars and that their death occurs in 2009. Their estate would be in the 48% bracket. This means that poor Paris Hilton would have to pay about 13 million dollars in tax and have to survive on the remaining 15 million dollars. Doesn’t that bring a tear to your eye! If, however, her parents died in 2010, Paris would not have to pay a dime in estate tax! What the Federal legislators are now debating is how much estate tax, if anything, Paris would have to pay if her parents died in 2011 and beyond. With so many other taxes around, it's hard to understand why this is the one Congress would repeal. It falls, in effect, on the heirs to the wealthiest Americans. Less than 1 percent of the people who died in 2004 paid an estate tax, and half the revenue from the tax came from estates valued at $10 million or more. It is estimated by the federal Center on Budget and Policy Priorities that the repeal of the estate tax would cost the government close to $1 trillion between 2012 and 2021. This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different). Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds masters in accounting and a masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781)233-4444. To view this or any prior article, please visit our web site at www.elderlawcenter.org |
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