Christopher B. Kroll & Associates – Elder Law Solutions

     With Senate Democrats unable to persuade Republicans to extend the 2009 estate tax law for even a couple of months until a more permanent solution could be devised, there is currently no tax on the estates of those dying during 2010.  Although congress may reinstate the tax retroactively in 2010, perhaps as part of broader tax reform, this is by no means a certainty.

     If Congress fails to act, a few thousand very wealthy families will have reason to celebrate, while tens of thousands of taxpayers of more modest means will pay capital gains on inherited assets–and executors will face additional and confusing administrative burdens.  And if Congress does change the law retroactively, extensive litigation over inheritances is almost guaranteed.

     Congress has had nine years to prevent this from happening but hasn’t been able to.  Under the provisions of a bill enacted in 2001, the value of estates exempt from the tax has been gradually raised over the past eight years while the tax rate on estates has been reduced.  In 2009, only estates valued at $3.5 million or more were taxed at a rate of 45 percent.  For 2010, according to the 2001 law, the estate tax disappears entirely, only to be restored in 2011 at a rate of 55 percent on estates of $1 million or more.