Little noticed in the Washington furor over healthcare legislation is the scheduled reduction to zero of the estate tax effective January 1, 2010. Presently the first $3.5 million of an estate is not subject to tax, with the maximum rate of 45% for amounts in excess of this exemption. Under the terms of present federal statute (brought about by the 2001 Tax Act commonly known by its acronym EGTRRA) the estate tax will automatically be repealed effective January 1, 2010 unless Congress acts very soon (note the House of Representatives is scheduled to start it's holiday break after session today, Friday December 18th and not return until after the first of the year).
Most estate planners, including this writer, were of the opinion that Congress would not allow the repeal to occur. Since EGTRRA has only 2010 as a year of no estate tax with a "sunset" provision that provides for reinstatement of estate tax effective January 1, 2011 with exemption of $1 million and maximum rate of 55% (60% counting surtax on estates over $10 million up to about $17 million), having one year with zero estate tax is unbelievably bad social policy. Wealthy families would benefit tremendously from a death and resultant inheritance in 2010 only. Gallows humor has described this environment as "Throw Mama from the Train".
We are at the precipice of such a 2010 with no estate tax and all that comes with that. Sad that our political "leaders" have allowed it to come to this. What happens (or doesn't happen) with estate tax legislation now bears extremely close scrutiny.