Federal Estate Tax Update

Under the federal Bush tax-cut legislation enacted in 2001, the federal estate tax was phased out through 2010, when the tax was to be repealed altogether--but only for one year:  in 2011, the tax was to return, at the same high rates that were in effect in 2001.  Throughout 2009, it was expected that Congress would remedy this awkward situation by enacting a compromise that would continue the 2009 rates of the estate tax both for 2010 and for future years.  That rate is 45% of the amount of a decedent's estate that exceeds the exemption of $3.5 million.  This is said by the proponents of the compromise to effectively exempt from tax all but a few dozen of the largest estates per year.  Congress, however, has not acted, and the estate tax was repealed at the end of 2009, for the 2010 calendar year.  There is now talk in Congress of enacting last year's compromise retroactively, or perhaps making other changes - all is currently very uncertain.