Articles (3)

Welcome to my first advanced sales article. In future blogs and articles, I will address a variety of subjects that top insurance producers like you care about. My hope is that they will become a useful, interactive forum for idea sharing — and even respectful disagreement. The topics discussed will be far ranging: everything from stress-testing and implementing advanced planning and wealth transfer concepts, to sales ideas and product niches, to legislative and regulatory rules that affect the life insurance landscape, to speculation about political and the macro-economic factors that influence our industry. Let’s jump right into it.

I want to begin with the November elections and what it might mean for the estate tax. The current estate tax regime ($5.12 million dollar unified gift and estate tax exemption with a maximum rate of 35 percent) is set to expire on December 31, 2012. Absent new legislation, the estate and gift tax exemptions are scheduled to decrease to $1 million and the maximum rate will jump as high as 60 percent. The administration’s 2013 budget proposal indicates that President Obama favors separating the transfer taxes into an estate tax exemption of $3.5 million and a gift tax exemption of $1.0 million, both with a maximum rate of 45 percent. Governor Romney is an advocate for repeal. Of course, laws aren’t passed in a vacuum.

The presidential election

The presidential candidates are (at this writing) in a near statistical dead heat according to most polls. While the president has the power to control the political conversation, he alone (no matter who is in office) cannot effectuate legislation without the cooperation of both houses of Congress. Therefore, a discussion of the future of the estate tax must take into consideration the current and future make up of Congress.

The House

Currently, in the House of Representatives there are 240 Republicans, 197 Democrats and 3 vacant seats. Prognosticators are confident that 183 of the Democrats 197 seats will be held by Democrats and that 226 of the 240 Republican seats are safe. Although opinions vary, the Real Clear Politics poll estimates that 26 seats are up for grabs. This means that the Republican’s majority in the House is relatively secure because the Democrats would have to hold onto all of the seats they currently hold plus pick up an additional 19, which, while possible, would be a long-shot.

The Senate

The Senate has 47 Republicans, 51 Democrats and 2 Independents, who caucus with the Democrats. Twenty-one seats are up for election. According to the most recent Real Clear poll, eight are safely Democrat (including Maine, with Olympia Snowe (R) retiring) and one is safely Republican. The remaining 12 seats are toss ups which are likely to split by Republicans and Democrats. The Republicans will have to garner eight of the toss ups to take a majority in the Senate, which is possible, but unlikely.

Based on the current races it is likely that the House will remain Republican and the Senate will remain Democrat, with both majorities narrowing.

If Obama wins, he will need at least 11 Republicans (but, probably more) to compromise and agree to his estate tax plan. This is unlikely, given today’s political climate.

If Romney wins, he will need at least six Democratic senators to cross the aisle. This also seems far-fetched to me; however, somewhere along the line, someone has to compromise. Stay tuned for more.

These materials are provided for information only. Statements, recommendations and opinions contained in the materials are those of the individual authors and do not necessarily reflect the opinions or industry position taken by Crump, and making this material available does not constitute an endorsement of the concepts by Crump. There is no assurance that any statement contained or cited in the material is true, correct, precise or up-to-date. Crump makes no representation or warranty regarding the accuracy of the content. The information provided in these materials is not intended to provide tax or legal advice, or to set forth solutions for individual problems. Crump does not provide financial, tax or legal advice regarding any insurance products or programs. Depending on the usage of this material, you and/or your agency may choose to have a legal review performed on your own prior to utilizing the concepts contained herein.