With a year-end deadline approaching, the House moved to prevent a repeal of the estate tax from taking place next year, voting instead to approve a permanent extension of the current levy.
But the legislation may not make it through the Senate. That means the tax could lapse entirely next year, based on the provisions of Bush-era legislation.
The House bill exempts the first $3.5 million of an estate, or $7 million for married couples, and taxes inherited wealth above that at 45%, the same as the 2009 rate. It passed by a vote of 225 to 200, largely along party lines, with most Democrats in favor and Republicans in opposition.
If the legislation isn't completed before January 1, the estate tax would vanish in 2010, which is how the Bush-era tax cuts were designed to work. If the matter remained unaddressed, the tax would return in 2011 at the old Clinton-era rate of 55%.
In 2001, when the current law was adopted, Republican demands for a permanent repeal were beaten back by concerns over the deficit, forcing them to settle for a one-year repeal instead. This is why we are facing this issue now.
As an estate planner, I do not like the potential for wild swings in tax rates. A permanent resolution of this tax issue by the House would allow families and business owners to plan with certainty rather than this unusual and unpredictable tax policy that has been in effect since 2001.Posted by Henry Moravec, III. Should you have any questions regarding your own situation, you can e-mail Hank Moravec at email@example.com or call him at (626) 793-3210. The firm website is http://www.moravecslaw.com/