Bipartisan legislation introduced in the Senate that would freeze the estate tax law slated for 2009 is encouraging, officials of the Association for Advanced Life Underwriting say.

The legislation was introduced July 17 by Sen. Tom Carper, D-Del.; Patrick Leahy, D-Vt.; and George Voinovich, R-Ohio.

The bill would create a lifetime estate tax exemption of $3.5 million in assets, indexed for inflation, and impose a top rate of 45%.

The AALU says the bill could be a harbinger of efforts in the next Congress for reasonable, sustainable estate tax reform.

“For a prominent Republican senator–one respected on both sides of the aisle–to propose a fiscally responsible, sustainable reform proposal is a major step forward,” said AALU CEO David Stertzer. “The efforts of Sen. Carper and Senator Leahy to find middle ground on the estate tax issue are laudable, and Senator Voinovich is a leader in pointing out national fiscal constraints and voting against measures like estate tax repeal that are unsustainable,” he said.

Such displays of bipartisanship are vital if Congress is to enact permanent estate tax reform legislation that would enable families and businesses to plan with certainty, said another AALU official, Luther Lockwood, chairman of its Business Insurance & Estate Planning Committee.

The AALU also took note of another bill introduced in the House that would freeze the $2 million estate tax exemption under current law in 2008 and impose other reforms. The bill, H.R. 6499, was introduced by Rep. Jim McDermott, D-Wash.

One key provision would provide for estate and gift tax reunification, by permitting lifetime gifts up to a maximum of $2 million rather than the $1 million gift tax limit under current law.

“AALU and other trade groups, such as those representing attorneys and accountants, have urged that reunification be a feature of permanent estate tax reform, because it encourages earlier planning and facilitates transmission of a larger portion of small businesses, farms and other assets to the next generation,” said Lockwood, who is managing director-national accounts with Wachovia Insurance Services, Winston-Salem, N.C.

In addition, the bill would provide for indexing of the $2 million limit to keep pace with inflation.

Finally, the bill would provide for “portability,” which would increase the exclusion amount for the estate tax by any unused exclusion from a deceased spouse.