On January 1, 2010, the estate tax was repealed. But the estate tax is not really dead, only sleeping. As of this date, this is my prognosis on the estate tax.
First, consider this summary:
| Estate Tax in 2009 | Estate Tax in 2010 | Estate Tax after 2010 | |
| Maximum Rate | 45% | 0% | 55% |
| Exemption | $3,500,000 | Unlimited | $1,000,000 |
In 2009, all the experts said that if Congress had any sense at all, they would amend the law by the end of the year to continue the estate tax as it was in 2009. Both Democrats and Republicans seemed to agree that the 2009 law was a reasonable compromise. But Congress did not pass a new estate tax law in 2009.
As 2009 ended with no changes to the estate tax, all the experts felt that Congress would soon pass a law that would be retroactive to the beginning of the year, continuing the estate tax as it was in 2009. That is still a possibility, but there appears to be little movement in Congress and a retroactive law becomes less likely as time goes on. The reason is that if you die today, and the law says there is no tax on your estate, it seems unconstitutional for Congress to later pass a law that retroactively places a tax on your estate.
Therefore, at great personal risk of being wrong, I make the following predictions:
1. The most likely scenario is that Congress passes a law by the end of 2010 continuing the estate tax as it was in 2009.
2. The second most likely scenario is that Congress does nothing, and allows the law to revert to a 55% tax and a $1,000,000 exemption per person.
With such uncertainty in the law, how do you make plans? My advice is to plan for the worst, hope for the best, and make your plans flexible enough to adapt to any changes in the law.