There has been a lot of talk this year about the estate tax; particularly, about the one-year-only repeal of the tax that took effect for 2010. Uncertainty has prevailed all year on this topic, and not much has changed.
The future of the estate tax rests in the hands of Congress. If Congress doesn’t do anything, then the tax will return starting January 1, 2011. When it comes back, the maximum estate tax rate will be 55%, and the exemption will be $1 million. Compare this with 2009, when the rate was 35% and the first $3.5 million of any given estate was exempt from taxation.
The one thing we know for sure is that Congress won’t do anything until after the summer recess, meaning that there won’t be any legislation on this subject until mid-September at the earliest. Some experts think that there won’t be any action until after the elections, meaning that the uncertainty will continue until very close to the end of the year.
What about the chance of a retroactive estate tax for the year 2010? This was a big concern at the beginning of the year and, although it’s always a possibility, most experts seem to think that the longer Congress waits to take action, the less likely a retroactive 2010 estate tax will be. Of course, Congress can always do whatever it decides.
So, where does all this uncertainty leave us? Anyone who has a net worth of $1 million or more – and this includes the value of your home, your investments, and your life insurance policies – should consult with an estate planning attorney about the need for tax planning.