Well Congress has done it this time. By failing to do anything at the end of the 2009 session, it has allowed the Federal Estate Tax to lapse. At first glance this seems like wonderful news, however, as with most Congressional acts (or failure to act in this case), the ramifications are ludicrous. If you have a rich uncle or grandparent this would be a good time to think about their deaths….but it better happen fast, the estate tax is back in 2011 with a vengeance.
As a result of another Congressional act in 2001, the estate tax disappeared on January 1, 2010 for just one year. On January 1, 2011, when the tax cuts expire, the estate tax comes back at 2001 rates or a top estate tax rate of 55% and with only the first $1 million of an estate exempt (as opposed to a 45% rate and $3,500,000.00 exemption that existed in 2009). So that wonderful news is temporary and may be even more temporary if Congress decides to try and act at the beginning of its 2010 session. Stay tuned here for the ramifications and consequences of the present law and what Congress may do to make this an even more untenable situation.