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CONGRESS FAILS TO ENACT LEGISLATION CLARIFYING THE ESTATE TAX
To the surprise of many, Congress has failed to modify the law regarding federal estate taxes, gift taxes and generation skipping transfer taxes. The law passed in 2001 provided for an increasing federal estate tax exemption through 2009 ($3.5 mm) and the repeal of the estate tax in the year 2010 for one year. In 2011 the existing law re-enacts the estate tax but allows only the $1 mm exemption that was in place in 2001.
We are now in 2010 and Congress has taken no action to change this law. In December 2009, the House of Representatives passed a law to permanent1y retain the estate tax under the 2009 rules with a $3.5 mm exemption. The Senate took no action, so there is no new law.
It is anticipated (with some degree of uncertainty) that Congress will re-enact the estate tax law retroactively to January 1, 2010, but until that occurs we are in limbo. There are many planning activities that can occur during a period when there is no estate or generation skipping transfer tax. Whether implementing these options is prudent is questionable, since most practitioners believe Congress wi11 make the estate tax law applicable in 2010. There is precedent for making the law retroactive to January 1, 2010 when President Carter repealed retroactively the generation skipping transfer taxes that were implemented at that time. That retroactive legislation was three years in the making. The gift tax remains in place but with a reduced maximum
rate of 35% instead of 45%. It is questionable if that reduction will remain, but that is the law for this year until changed.
Sitting and doing nothing may be one approach, but it may be more prudent to review your own plans in light of an anticipated S2 mm or $3.5 mm federal estate tax exemption. Please follow this website for updates as activities occur.
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