On May 11, 2010, Conrad Teitell sent a letter to Congress calling on Congress “to immediately clean up the untenable mess that Congress has created for Americans who are struggling to plan and administer estates.”
The point the letter makes regarding Congress's ability to fix the federal estate tax is important. With Mr. Teitell’s permission, I am republishing the letter in its entirety:
Members of the Senate Finance Committee:
Max Baucus, MT, Chairman
John D. Rockefeller, IV, WV
Kent Conrad, ND
Jeff Bingaman, NM
Blanche L. Lincoln, AR
John F. Kerry, MA
Ron Wyden, OR
Charles E. Schumer, NY
Debbie Stabenow, MI
Maria Cantwell, WA
Bill Nelson, FL
Robert Menendez, NJ
Thomas R. Carper, DE
Chuck Grassley, IA, Ranking Member
Orrin G. Hatch, UT
Olympia J. Snowe, ME
John Kyl, AZ
Jim Bunning, KY
Mike Crapo, ID
Pat Roberts, KS
John Ensign, NV
Michael B. Enzi, WY
John Cornyn, TX
The oil spewing into the Gulf can't be stanched by legislation. But you can by legislation immediately calm the troubled waters created by Congressional inaction on the estate tax.
On November 14, 2007, I testified as an invited witness -- with a businessman from Iowa, a rancher from Nevada, and an oracle from Omaha -- at your hearing, "Federal Estate Tax -- Uncertainty in Planning Under the Current Law."
My charge as the only estate planning lawyer on the panel was to describe how my law firm deals with the uncertainty of changing exemptions and rates through 2009, estate tax interruptus in 2010 (but with a gift tax and modified carryover basis) and a return of the estate tax in 2011 and beyond.
At that hearing, senator after senator lambasted the law's uncertainty -- but you were criticizing the very law that Congress had enacted.
Now that the law has lapsed for 2010, the uncertainty is magnified -- for those planning their estates and those administering estates of individuals who have died this year. In some cases, heirs may not receive their intended shares of an estate or be disinherited altogether. Under the law of unintended consequences, testamentary charitable remainder trusts created by individuals who die this year may not qualify as charitable remainder trusts. And a donor who creates an inter vivos charitable remainder trust this year could actually be deemed to make a gift to himself -- subject to the gift tax.
Oil spills are unimaginably difficult to clean up. But you have it in your power to immediately clean up the untenable mess that Congress has created for Americans who are struggling to plan and administer estates.
This letter represents my personal views and does not represent the official view of my law firm or any organization to which I belong. No client has engaged me to make these comments to you.
Staff: Jonathan Selib, Tiffany Smith, Theresa Pattara, Josh Gardner, John E. Castro, John Fetzer, Derek B. Dorn, Anna Taylor, Kathleen M. Kerrigan, John J. O'Neill III, M. Jeff Hamond, Colleen Einhart Briggs, Michael Daum, Ryan McCormick, Justin Field, Chris Pendergast, Kathy Nuebel Kovarik, Evan Liddiard, Bill Pewen, Dan Brandt, Karin M. Hope, Michael D. Quickel, Jennifer R. Cook, David Kirk Kavanaugh, Tori Gorman, Andrew Siracuse
A PDF of the letter can be downloaded here: Letter to Senate Finance Committee.
In his November 14, 2007 statement in front of Congress, Mr. Teitell makes a comparison to playing a game of Monopoly with shifting rules. Here is a video of the Senate Finance Committee’s 2007 Estate Tax Hearing. Mr. Teitell’s statement appears at 15:32:
Here is the transcript of Mr. Teitell’s statement:
Statement of Conrad Teitell
Mr. Chairman, Mr. Ranking Member, Members of the Committee:
I am Conrad Teitell, an estate planning lawyer with Cummings & Lockwood in our firm’s Stamford, Connecticut office.
Over 50 of our firm’s lawyers are involved in estate planning.
And I teach this stuff at a law school.
In Gone with the Wind, Margaret Mitchell observed that death, taxes and childbirth never come at a convenient time. Nor, she might have added, at a time certain.
This Committee has asked me to talk about the uncertainty in estate planning under current law — the one that Congress gave birth to in 2001. As all but troglodytes know, that law has a roller coaster estate tax exemption: $2 million this year and next; increased to $3.5 million in 2009. Then there is no estate tax whatsoever in 2010. But the estate tax is scheduled to reappear in 2011 and thereafter in all its glory. And the exemption will be limited to $1 million.
So, the only convenient time for death and taxes is 2010 — at least for the heirs.
We have complex tax laws because those laws reflect our complex society. However, it’s not the complexity that presents the problem with the current estate tax rules, but rather the uncertainty. And to cope with that uncertainty, we lawyers must often make complex plans even more so.
As I said a moment ago, I’ve been asked to talk about the complexities in planning under the current law — not whether estates should be taxed and if so with what exemption and at what rates.
My written statement for the record details the many problems under the current law that individuals face when trying to plan their estates. To name just a few:
Complicated trusts often have to be created to deal with the moving-target-estate tax exemption. And we have to draft for the contingency that there won’t be an estate tax in 2010;
Life insurance planning to pay for estate taxes and provide liquidity is difficult; and
Putting off decisions until Congress acts can be hazardous to your wealth.
Before I get back to the negatives, let me accentuate the positive — charitable bequests. This is the one area where it is easy to plan and draft under current law. The estate tax charitable deduction is unlimited, as it has been under our estate tax laws for almost 100 years.
Thanksgiving is just around the corner. Every year my family has a marathon Monopoly game — over the entire holiday weekend. This year, to make the game more realistic for my grandchildren, I’ve indexed the game for inflation.
If you buy Park Place, it will cost you $5 million.
The card that formerly said "Pay Tax Collector $200" will now say: "Pay $20,000 if you land at 7:00 or 8:00 o’clock; pay $15,000 if you land at 9:00 o’clock; and pay nothing at all if you land at 10:00 o’clock. But if you land at 11:00 o’clock or later, pay $40,000."
That’s analogous to the changing estate tax exemption over the next couple of years, complete repeal of the tax in 2010, but a return of a $1 million exemption in 2011 and beyond.
My version of the rules will surely make our Monopoly game more interesting. But our nation’s estate tax rules shouldn’t be a roll of the dice!
This transcript was taken from http://www.taxwisegiving.com/practice/senate_finance_committee.htm
Taken together, Mr. Teitell’s statements to Congress alert it to its responsibility as a powerful decision maker: Congress has the power write the federal estate tax rules and to clean up the mess it has created.
Conrad Teitell is an esteemed practicing lawyer, adjunct professor, writer, and speaker. His insights and teachings guide so many practitioners. To learn more about him, see