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Monday, December 07, 2009


Since the early days of George Bush, Jr.’s administration, 2010 has been out there as the year in which there will be no federal estate tax. Also since that time, we have been predicting for our clients that this would never come to pass, and that sometime before then the repeal would be repealed, and higher unified credit and lower maximum tax rates would be made permanent.

Politics being what they are, what Congress had 8 years to deal with is now on the front burner, with only a few weeks left in 2009 to take action. Of course, Congress could act sometime in 2010 on a retroactive basis to the change the law, but many in Congress are adverse to retroactive tax legislation on major issues.

For the first time, legislation has cleared at least one house of Congress to repeal the repeal. Last Friday, the House of Representatives passed a bill that would repeal the repeal of estate taxes in 2010, make permanent the $3.5 million unified credit applicable in 2009, and also make permanent the 2009 maximum federal estate tax rate of 45%. The legislation would also repeal the one year of carryover basis that is presently in the law for 2010.

The Senate has not yet passed a corresponding bill. Issues likely to arise in the Senate include the amount of the unified credit equivalent, whether to index that credit for inflation, the maximum tax rate, bringing the gift tax unified credit back in line with the estate tax unified credit, and portability of the unified credit between spouses.

Whether any bill will clear both houses of Congress before year end is anyone’s guess.

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