The vote was 246-178 in favor of the bill (see the full report on the vote from the New York Times here).
KYEstates alerted readers to this legislation, which requires 10-year minimum GRAT terms and non-“zeroed-out” GRATs, in our earlier post here, and noted the FY2011 Green Book’s fascination with the topic here.
Gary Beyer reports that the GRAT restrictions in H.R. 4849 are projected to raise $4.45 billion over 10 years. (KYEstates notes that it’d be pretty interesting to see the CBO’s client longevity and GRAT investment performance assumptions supporting that revenue estimate!) If H.R. 4849 or something similar to it passes the Senate, presumably President Obama will sign it.
If the bill or something like it does become law, then the practical consequence will be to make GRATs less attractive for older clients. (This, in turn, ought to increase the comparative attractiveness of grantor trust sales.)
Readers, the passage of H.R. 4849 has raised a lot of stir in the estate planning and wealth management press (see, e.g., here in Forbes). But, is the bill actually going to pass the Senate? KYEstates isn’t so sure. Consider the vote data on the bill in the House linked to above in the NYT. What we see there is a pretty solid party-line vote. Not as solid as the vote on the health care bill, but pretty solid nonetheless. Specifically, there were only 4 Republican “yes” votes, and only 7 Democratic “no” votes. Does this suggest that the Democrats will be able to secure 60 votes for the bill in the Senate and break a filibuster? KYEstates isn’t convinced. Unless Democratic leadership in the Senate decides this bill is important enough to pass by reconciliation, it may not get too far.
It’s interesting to consider H.R. 4849 as a “test case” for forecasting the fate of the estate tax, which KYEstates previously did here. What H.R. 4849 shows is that there are more than enough Democratic votes in the House to pass legislation that uses the transfer tax to raise more revenue, particularly when Congressional action is difficult to spin as a “tax hike” in a 30-second campaign commercial. Does this demonstrated fact suggest that the House might be inclined to see full year of repeal in 2010 elapse, and let EGTRRA run its full course all the way to a $1 million exemption in 2011? Perhaps so. It is not unreasonable to characterize the GRAT-related provisions of H.R. 4849 as a “tax hike”. If GOP senators are willing to vote in favor of them, it will say a great deal. Alternatively, if the GOP votes party-line against H.R. 4849, KYEstates believes that increases the likelihood the estate tax will be used only for political theatre in 2010, and that EGTRRA will run its full course at least until after the midterms, or even all the way into 2011.
KYEstates will, of course, continue to monitor these developments closely.
And, readers, we’d be remiss not to at least link you to coverage of what promises to be the single craziest probate case of 2010. As reported by Gary Beyer here, in Long v. Alford, — S.W.3d —-, 2010 Ark. App. 233, 2010 WL 811289, the Court of Appeals of Arkansas overruled a lower court ruling and ordered the exhumation of a descendant, because the decedent was not buried as directed in his Will. The plaintiff had known the decedent’s wishes but had not informed anyone about them earlier, when the decedent was buried. Nonetheless, the Appeals Court held that the plaintiff’s failure to act did not require a finding of estoppel against the plaintiff. In other words, the decedent’s wishes were paramount, and weren’t undercut by the plaintiff’s initial failure to effectuate those wishes. Even though KYEstates supposes Long might serve as persuasive authority in Kentucky and Florida, we hope no reader will ever be forced to rely on the case.