Estate tax remains in limbo

Sarah Spear, director of policy and public affairs for the Association for Advanced Life Underwriting, told National Underwriter Life & Health recently that “the vehicle and timing of a decision remain unclear.” (read the full article here) Spear went on to say that producers are being affected by the uncertainty in issues such as reviewing the bypass trusts, gifting to grandchildren because of the absence of a generation-skipping transfer tax and carry-over basis issues.

There had been an effort in the House in early December to establish the estate tax at a $3.5 million per-person exemption and a maximum tax rate of 45%. And Sen. Blanche Lincoln, D-Ark., and Jon Kyl, R-Ariz., had proposed a permanent estate tax with a $5 million per-person exemption and a maximum tax rate of 35%. Under current law, the estate tax would return from a one-year holiday in 2011 with an exemption of $1 million and a top tax rate of 55%.

What will happen when Congress readdresses the issue – probably in February – remains uncertain. You can bet something will be done – divided or not, the government will not give away hundreds of millions in estate tax revenues by allowing that one-year holiday all year. And whatever they decide on will likely be retroactive to Jan. 1. Then down the road the courts will get to decide if that’s legal or not.