I am glad to finally hear rumors that the federal estate tax will be dealt with this year by Congress. Back in 2001, Congress passed a law that increased the federal estate tax exemption from $1 million per person up to $3.5 million per person by 2009 and then ended the estate tax for 2010. The problem was that the law reverted back to the 2001 status after 2010.
The bizarre result was that there was no federal estate tax in 2010 (good news for George Steinbrenner’s family as well as the families of a few other billionaires) while Congressed ignored the problem. Then, right before it looked like we were going to go back to a $1 million exemption for 2011, Congress did what they are so good at doing: they put in a two-year fix and kicked the can to 2012, a presidential election year.
Now, it seems like they are going to be forced to deal with the estate tax when they take up the issue of the Bush tax cuts. Assuming no unexpected change in the make-up of Congress, the prognosticators are saying that we are going to keep the $5 million exemption for at least another year and, likely, for the long-term. Let’s hope it happens because it will make estate planning much more predictable for most people.