Changes to the federal estate tax may be on the way as the
The two sides have four weeks to reach an agreement on how to cut the federal deficit before going over the so-called fiscal cliff, a scenario that grew out of last year's partisan impasse over whether to increase the nation's borrowing authority. Congressional Republicans agreed to raise the debt ceiling in exchange for the promise of future budget cuts. To keep the pressure on
The estate tax, one of those set to expire, has become a point of contention between Democrats and Republicans in the fiscal cliff negotiations.
Democrats, led by Obama, are pressuring Republicans to approve a deal that extends most of the tax breaks passed under former President
Currently, inherited assets that exceed
Earlier this week, House Speaker
Both the Obama and Boehner plans have met with bipartisan criticism on the Hill. But some insurance industry trade organizations are offering their support for raising the estate tax.
The life insurance industry in particular supports increasing the estate tax and lowering the exemption.
A higher estate tax rate makes it more likely that estate planners will turn to life insurance to help alleviate the additional financial burden. That said, it puts those in the industry in an odd position when dealing with consumers. As
Morton said that the certainty engendered by a permanent estate tax would help life insurance professionals plan for policies written decades before death benefits are issued.
However, Morton noted that the difference between the current rate of 35% after a
Morton also said AALU supports a continuation of unified estate and federal gift tax credits. "We support unified tax credits because it allows clients to transfer assets during life and not just death, which helps in business succession," Morton said. "If we can get past the question of how top earners should be taxed, we could get to questions like the unified credits."
As the fiscal cliff negotiations proceed, Morton said the life insurance community will be watching to see whether any of the proposed changes would affect how the tax code views life products. "The current system is appropriate and shouldn't be changed.," Morton said.
At this stage, however, Morton said he doesn't expect a long-term deal to overhaul the tax code in the near future. "We could see them come up with something for the short term and then come back later," he said. "
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|Source:||A.M. Best Company, Inc.|