TEXT OF INTERVIEW
Tess Vigeland: You get back from summer vacation, ease into things at work unless you’re a member of Congress.
Then you’ll be heading straight into a discussion about the Bush tax cuts. A whole bunch of them are set to expire this year. The estate tax lapsed last year and if Congress does nothing, estates larger than a million bucks will find themselves taxed upon death as of January 1. Joining me to hash this out is Laura Sanders. She covers taxes for the Wall Street Journal.
Laura Sanders: Thank you so much for having me.
Vigeland: So it’s a good year to die — if you’re rich.
Sanders: Well, if you’re rich it is. If you’re less rich, perhaps, it’s a worse year to die. And because of the strange situation this year, people worked trying to stay alive into the new year and when January 2011 comes, they might be hoping to die.
Vigeland: This just sounds absolutely bizarre. So let’s talk about how we got to this point. How did we get to a situation where there’s this one year — 2010 — where it’s all about death.
Sanders: Well, it could only happen with Congress. But you have to go back about 10 years. In 2001, an agreement was forged that the estate tax would get more and more generous for about nine years and then it would disappear entirely for 2010.
Vigeland: And when we say that the estate tax would get more and more generous, that means that it would actually be less.
Sanders: It would. The exemption would be higher and the rate would be lower. Now, the assumption at the time that the deal was done, was that Congress would go back and change this so that the repeal would never actually take place. But, procrastination being procrastination, they never got there.
Vigeland: So, we were kind of joking about this, but did you hear of any stories where people literally tried to hang on until January 1 of this year, or are thinking, you know, I wonder if I should speed things up before January 1 of next year? Are we really at that point?
Sanders: Yes, we really were at that point. Of course now, last year, people wanted to live into the new year. People with about $4 million worth of assets and that could include family farms and small businesses were better off and we have several documented cases where people just willed themselves to stay alive for an event and lawyers say that happens for an anniversary or a birthday. In this case, there was a woman in California who owned a family farm and she was in a coma. She was diagnosed with incurable cancer in October. She kept waking up and saying, ‘What day is it? What time is it?’ She made her grandson promise to tell her, even if her other relatives didn’t want to tell her and she died on New Year’s morning. But there are other cases as well, she’s not alone.
Vigeland: Ok, of course but on the opposite end of that, that means that if you are in a situation of poor health this year, that you’re hoping things would come to a conclusion before January 1?
Sanders: Or maybe your heirs are hoping things will come to a conclusion.
Vigeland: Well, what are the changes that the estate tax will come back January 1? I mean is there any sign that this is going to get taken care of before the end of the year?
Sanders: Well, there’s not enough of a sign. People are starting to talk about it, but Congress is really very dysfunctional at this point and they were at their most dysfunctional on this issue.
Vigeland: So if Congress decides to reinstate this, is there any chance that they would make it retroactive, back through this current year?
Sanders: That’s what everybody thought would happen and hoped would happen simply because then you would be dealing with settled law. We know what the law was last year. We even know what it is next year. This year is a big fat zero. There’s no guidance from the IRS or anything. So, there is the expectation that Congress will have to make it retroactive.
Vigeland: Do you know, are people actually starting to write their wills differently because of what’s happened here?
Sanders: They absolutely are. The problem is that people don’t quite know how to write the wills differently in the absence of a law. And the lawyers don’t know either because as one said to me, ‘We don’t know what the law will be or even what the law has been.’
Vigeland: Wow. Alright Laura Sanders of the Wall Street Journal. Thanks so much for helping us through this.
Sanders: And thank you for having me.
Marketplace is on a mission.
We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.
Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?