The latest estate tax news is more of the same. This past week Senators considered how to deal with the law as it exists in 2010 – no estate tax but possible income tax on the sale of inherited assets worth more than certain amounts – and the law as it will exist in 2011 – a return of the estate tax for net worth’s exceeding $1 million (or $2 million for married couples who plan properly).
There had been reports that the Senate was making progress in resolving the estate tax uncertainty. The House is all but set to approve a $3.5 million exemption amount and a 45% tax rate. In 2009, the House had sent a Bill to the Senate with these provisions, which are the same as Obama supported during his campaign and which presumably would still be agreeable with the Administration. However, in 2009, the Senate could not agree on a $5 million exemption; or only a $1 million exemption; or the House approved $3.5 million exemption.
Now, in the Senate, a $5 million exemption proposal appeared to be making progress, but Senate Finance Committee Chairman Max Baucus said last week there is no deal, plain and simple. Senator Bob Casey, representing one segment in the Senate, said it was a mistake to provide greater estate tax relief to "less than 1 percent of the population" that currently pays estate tax each year. Meanwhile, the Center on Budget and Policy Priorities, a non-profit think tank that provides policy analysis on economic issues, stated in a May 21 Report, that a $5 million exemption amount would increase the deficit in a greater amount than projected by the recent Senate proposal. But regardless, if we take Baucus, Casey and others at their word, there is no imminent Senate agreement so the question is moot for now.
Also up in the air is the status of estates for 2010 decedents. There are questions regarding whether Congress will re-institute the estate tax for 2010; whether Congress will ultimately allow 2010 estates to elect between an estate tax (still to be enacted) or opt for no estate tax and no step up in basis (the current law). We have only the tea leaves to count on, which serve nobody’s interest.