ESTATE TAX LEGISLATIVE UPDATE 2010

Under present law, the estate tax has been repealed for 2010 but resurfaces with an exemption of $1.0 million in 2011.  Taxable estates over $1.0 million in 2011 will be subject to estate taxes with a top marginal tax rate of 50%. 

The step-up in tax basis at death has been eliminated for 2010 but a new exemption of 1.3 million for capital gains has been added so the capital gains tax liability only applies to larger estates.

Proposed legislation to change the current estate tax exemption has taken several forms:

1.  H.R. 436 proposes to maintain the $3.5 million exemption.     This bill also proposes significant restrictions on valuation discounts which are commonly taken with family limited partnerships and similar business arrangements.

2.  H.R. 498 proposes a $5.0 exemption which would be phased in through 2015 with the exemption thereafter indexed to inflation.

3.  H. R. 1986 proposes a $4.0 million dollars exemption with a 40% tax rate.

4.  H.R. 2023 proposes an exemption of $2.0 million indexed to inflation after 2010.   The tax rate would be tiered from 45% to 55% depending upon the size of the estate.

5.  S.B. 722 proposes that the exemption remain at $3.5 million dollars and be indexed to inflation starting in 2010.   The estate tax exemption would be unified with the gift tax exemption so that both the gift and estate tax exemptions would be $3.5 million rather than the present $1.0 million for the gift tax exemption.   The bill also proposes that the deceased spouse's exemption be portable.

6.  2009 Budget Resolutions propose a $5.0 million exemption indexed for inflation after 2010.   They also propose unification of the estate and gift tax exemptions and portability of the deceased spouse's exemption like S.B. 722.

Further updates will be posted as changes occur.