As most everyone knows by know, there is no federal estate tax this year. As part of the 2001 Bush tax cuts, the estate tax was gradually repealed starting in 2001 until complete repeal in 2010. Because of the Congressional budget rules (of which I will spare you), the Republicans did not have enough votes to make the repeal permanent. Instead, without further Congressional action, the estate tax is reinstated beginning next year. In addition, upon reinstatement, the federal estate tax exemption is only $1,000,000 per person (whereas it as $3,500,000 per person last year) and the top rate increases to 55%.
Most everyone thinks that we will have an estate tax next year, but that Congress will act and not allow the exemption to return to $1,000,000. (Of course, this time last year, I counseled clients that there was no way Congress would allow the estate tax to be repealed for a year. So, frankly, no one really knows.) But, the consensus also seems to be that it will be next year before Congress takes action. First, nothing will take place before next month's elections. Then, the universal belief is that the Republicans (who favor repeal) will make substantial gains in Congress this year. Because of this, the Republicans will likely be able to strike a better deal by waiting until the beginning of next year when all their new people are in office, rather than trying to pass some lame-duck legislation before the end of the year. Accordingly, it could be January, February or later before we get any Congressional action, and who knows, maybe nothing will happen.
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