Breaking News: House Votes Yes On Estate Tax Bill
On Thursday, December 3, the House of Representatives passed the "Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009" (H.R. 4154) sponsored by Rep. Earl Pomeroy (D-ND) by a vote of 225-200. The bill makes permanent current estate tax provisions of a 45 percent estate tax rate and a $3.5 million per-person exemption. There is no provision for indexing for inflation. The bill also maintains the so-called “step-up in basis” tax rules. Similar action is not expected in the Senate, where a one year extension of current law is considered more likely. To read a record of the proceedings, visit: frwebgate.access.gpo.gov/cgi-bin/getpage.cgi
As I have been advising my clients for the last few years, if Congress takes no action whatsoever, the estate tax is scheduled to enter one year of full repeal in 2010 followed by a return of the estate tax in 2011 with a much lower exemption amount ($1 million) and a much higher maximum tax rate (55%). I am optimistic, however, that logic will prevail (despite the fact that we are dealing with D.C. politics) and our current $3.5 million exemption will be extended for at least the short term.
Two important points I want to stress: (1) The federal estate tax is all-encompassing and is levied upon a deceased person's worldwide gross estate (any and all assets that the individual owned or had an interest in as of the date of death, i.e. real estate, cash, stocks, bonds, life insurance proceeds, patents, etc.); and (2) In a married couple scenario, the present $3.5 million exemption is not "automatic" for each spouse; proper planning must be implemented to take advantage of this "double exemption" opportunity.
Our firm will continue to closely monitor these developments and will certainly alert any clients whose plans may need attention as a result thereof.
