In mid-May, Congress Daily reported that Congress was nearing a resolution on the estate tax debate, stating that an agreement between Senate Minority Whip Jon Kyl (R-AZ), Senate Finance Chairman Max Baucus (D-MT), Sen. Charles Grassley (D-IA) and Senate Agriculture Chairwoman Blanche Lincoln (D-AR) would set the estate tax rate at 35% with a $5 million exemption per person, indexed for inflation.
A day later, the same publication reported that “an estate tax agreement is far from certain” and speculated that it could even return at a 55% rate and $1 million exemption beginning January 1, 2011. Sen. Bernie Sanders (I-VT) advocated in favor of the $1 million exemption in 2011 and stated that he would do everything he could to stop the 35%/$5 million proposal from becoming a reality. Several other Senators indicated that resolutions have not even been reached within the parties, let alone amongst the Senate as a whole.
Practitioners are not the only ones frustrated with the situation; frustration seems to be permeating the legislature as well. Perhaps due to the public’s skepticism and lack of confidence in Washington, it appears that an increasing number of commentators are bracing themselves and their clients for the $1 million exemption and 55% estate tax rate in 2011. Though it would be a surprise if it came to that, no one expected January 1, 2010 to arrive without a new law either.
As mentioned in Newsletter #1, flexibility in estate planning documents is essential at this time. If you have an existing Will or Trust, make sure to discuss this issue with an estate planning attorney and have your documents reviewed.