Will the estate tax be repealed New Year’s Day?
No it will not. Though one cannot say for sure what is going to happen with the estate tax, it is highly unlikely it will actually be repealed effective January 1, 2010, as originally called for under the estate tax legislation enacted under President Bush.
The House of Representatives voted December 3, by a narrow party line vote of 225-200, to continue the estate tax at a 45% rate for estates over $3.5 million, which exclude 99% of American estates from the burden of the tax. The proposed law would make an important change by allowing married couples to use both exemptions without regard to the actual ownership of assets, assuring an effective $7 million exemption for married couples. It also preserves the important current rules for a fresh start basis for assets at death, which typically means wiping out built in capital gains at death without any income taxes.
The Senate still has to act on the estate tax and it is not certain what will happen there, or if the Senate will in fact vote on this issue before recessing for the holidays. One can hope it will or chaos will result for the families of persons who die in 2010 when current law would repeal the estate tax and impose a carry over of income tax basis.
If you have any planning questions or concerns or would like to talk about estate planning issues contact Bryan Dench or Jill Checkoway for more information.