Inquiring minds want to know: what is the latest in Congress on estate tax? All tax legislation must come from the House Ways and Means Committee, and two news items came out of Ways and Means last week.
First, Chairman Charles Rangel, despite his own problems and contrary to earlier statements, said he is drafting a bill to make the $3.5 million exemption permanent. In the past, Rangel said he favored extending the $3.5 exemption amount one year and addressing it again in 2010.
Second, two other Ways and Means Committee members introduced legislation to increase the exemption to $5 million over the next 10 years, plus index the amount for inflation. This bill would also lower the estate tax rate from 45% to 35%.
As you know from reading this Blog and other publications, if the estate tax law is not addressed the exemption amount will fall to $1 million with a maximum 55% tax rate in 2011. The estate tax would disappear entirely for one year, 2010. Hence, the estate tax system is a Congressional priority, notwithstanding all the other issues Congress is now facing.
Besides dealing with the exemption amount and the tax rate, there are other important estate issues before Congress. For example:
the issue of "portability," i.e., the ability of a married couple to protect $7 million without having to carefully arrange asset titling and beneficiary designations prior to their deaths.
whether Congress should curtail certain advanced estate planning tools, such as being able to discount for tax purposes the value of intra-family gifts and the use of 2-year GRATS.
(I have written in prior posts on portability, discounting and GRATS.) As of now, it is anticipated that none of these subjects will be addressed this year.