Tax, Trusts & Estates Law Monitor : Estate Planning Lawyer & Attorney : Cole Schotz Meisel Forman & Leonard Law Firm : NJ, Mid-Atlantic Gift Tax & Trust Issues

Repeal of the federal estate tax in 2010 – once unthinkable – now appears likely. While the House of Representatives passed a permanent extension of the estate tax in early December, the Senate has been unable to pass a temporary or permanent extension, or anything else related to the estate tax, as Congress rushes toward its holiday recess. It now appears likely that nothing will be passed prior to the end of the year and we will begin 2010 with no federal estate tax.

Congressional leaders have stated that they will resume efforts to pass legislation as soon as Congress returns, so repeal, if it happens, may be short-lived. Some Republicans have stated that they feel they will have better leverage to negotiate if the estate tax is actually repealed. Democrats have stated they would hope to restore the current tax and make it retroactive to January 1.

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On December 3, the House of Representatives by a vote of 225 to 200 passed an estate tax bill which makes the $3.5 million applicable exclusion amount and the 45% estate tax rate permanent. Every Republican, along with 26 Democrats, voted no on the bill. If a law is not passed by December 31, the estate tax will be repealed for one year, and in 2011, the estate tax will return with a $1 million exemption (subject to inflation) and a top estate tax rate of 55%. The Senate is not expected to adopt this bill; it is more likely to pass a one year extension of the current law. We will keep you posted on all developments as they unfold.

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