Finally the new year has arrived and despite several predictions that congress would provide some clarity on the issue of federal estate taxes, it didn't revise the law. Also congress has passed a bill to reinstate the estate tax in 2010, it failed to pass the senate. The lawgiver's inactiveness has produced a situation of uncertainty in the estate planning community.
Due to the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) there are no more estate taxes for estates that are bequeathed in 2010 under current law. However many analysts predict a retroactive action of the lawgiver. With a retroactive bill the legislative could enact a law which has an effective date that precedes the actual passage date.
The exact contents of such a bill and it's implications on taxation of estates can't be foreseen at this time. Nevertheless it is very likely that the current structure of estate taxation would not be changed. If the version proposed by the House of Representatives prevails, 2010 might bring a 45 % estate tax rate and a $3.5 million personal exclusion. If the lawgiver remains inactive through 2010 estate taxes will return to the year 2000 level in 2011. Back then estate taxes were due for all estates over $1 million and taxed up to 55 %.
From an estate planning perspective it would be unwise to change an existing estate plan to match a still uncertain tax situation. It is rather advisable to stick with the existing plan. If there won't be any estate taxes in 2010 and an estate is passed to the heirs the heirs can only profit from the repeal of the tax. One should keep an eye open (or read this blog) for upcoming changes in law. If the lawgiver has taken action it may be time to revise your estate plan.
If you have further questions with regard to estate planning in general please contact our office at 1-800-303-2964. I am located at 1990 North California Blvd, Walnut Creek, California 94596. I have additional offices in Fairfield, Oakland, and Sacramento. I offer free initial consultations. For further reference see my website (www.rinnelaw.com).
