Estate Tax, BRB?

With other pressing matter on their plates (health care reform, holiday parties, etc.), your representatives failed to act on the expiring Economic Growth and Tax Relief Reconciliation Act of 2001. This act passed under Bush II provided a ten-year period of increasing exemptions from the estate tax, culminating in an "unlimited" exemption in 2010. Most experts expected Congress to act on this loophole before 2010 arrived. However, as of today, no modification to the Act has passed through Congress.

Senators and Reps are well aware of this omission. Some are promising to have a retroactive modification to the exemption in place soon. While it looks like there is an unlimited exemption currently, the current exemption could disappear if new legislation is enacted with a "look-back" or retroactive date to January 1, 2010. In other words, estates passing free of tax in the early months of 2010 could receive a tax bill later in the year.

If Congress keeps procrastinating and does not enact new legislation concerning exemptions in 2010, 2011 will revert back to the federal exemption rates from 2000 - $1 million dollars. This is called a "sunset" provision and was included in the 2001 legislation.

The WSJ details this issue here.

Summary of the Economic Growth and Tax Relief Reconciliation Act.