Expiration of Estate Tax Likely to Be Temporary -PND 12/20/09

With Congress unable to agree on a year-end deal to extend the federal estate tax, which is set to expire on January 1, congressional Democrats have vowed to return from their holiday recess to pass an extension of the tax early in the new year, the Associated Press reports.

Because of changes passed by Congress in 2001, the tax — currently 45 percent on estates valued at more than $3.5 million ($7 million for married couples) — is scheduled to disappear in 2010 before returning in 2011 at a 55 percent rate on estates of $1 million or more. Earlier this month, the House passed an indefinite extension of the tax at the current rate. But while House Democrats have proposed a variety of shorter extensions since then, the Senate has been unable to come up with enough votes to support any of the proposals.

Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee, proposed a two-year extension of the tax at the 2009 rate, but under Senate rules lawmakers couldn't take up the bill unless all senators agreed, which did not happen. Still, Democrats expect to take up the issue upon their return in January, with some key lawmakers vowing to make the tax retroactive to the start of the year.

For heirs and their tax planners, the uncertainty poses a challenge. "You certainly have clients who may have a few months to live, and they need to get their affairs in order," said Charles Schultz, director of private wealth and tax advisory services at accounting firm RSM McGladrey. "It makes it difficult to plan."

Ohlemacher, Stephen. “Democrats: Estate Tax Repeal to Be Short-Lived.” Associated Press 12/16/09.