The Status of the Estate Tax

With the new year nearing, we can expect Congress to act in the next few months to pass new estate tax legislation. What changes can we expect to see? Federal Estate Tax Exemption and Rates:

• Congress's concurrent budget resolution for fiscal year 2010 is based on the assumption that the federal estate tax exemption will be frozen at $3.5 million with a 45% tax rate.

• Congress has introduced a number of House and Senate bills, ranging from repeal of the estate tax to Rep. McDermott (D-WA)'s "Sensible Estate Tax Act of 2009" (H.R. 2023), which calls for a $2 million exemption with new graduated rates of 45%, 50% and 55%.

• The Treasury Department's "Greenbook," which explains the Obama Administration's fiscal year 2010 revenue proposals, states on p. 125 of the Appendix: "Estate and gift taxes are assumed to be extended at parameters in effect for calendar year 2009 (a top rate of 45 percent and an exemption amount of $3.5 million)."

• We can expect that the most likely outcome is a $3.5 million exemption at a 45% rate -- but who really knows? It is our position to be flexible in our estate plan drafting in order to be able to move with the shifting actions of Congress. Stay tuned. Please let us know if we can help.