Estate Tax Extension Predicted

On September 2, 2009, John Buckley, Chief Tax Counsel for the House Ways and Means Committee, shared his opinion regarding the future of the federal estate tax: "I think you will probably see a one-year extension based on the statutory pay-go." Mr. Buckley was referring to the Statutory Pay-As-You-Go Act of 2009 (H.R. 2920). This bill passed the House in June, 2009. If enacted, it will undo some currently scheduled expenditures and tax provisions, including the previously scheduled permanent extension of the estate and gift tax at 2009 levels.

The permanent extension of the $3.5 million exemption, coupled with the 45% top estate tax, would cost the government $233 billion over 10 years. With a ballooning federal deficit, it is quite probable that the Senate will not pass a permanent estate tax extension but will instead extend the 2009 estate tax provisions for one more year.

This one-year "patch" still leaves the estate planning world in a state of uncertainty. With the large budget deficit numbers, Congress could decide to enact new legislation to revert the estate tax credit to its pre-Bush administration level of $1 million beginning in 2011. If that happens, individuals need to carefully review their estate plans and be in contact with their estate planning attorneys to determine the full impact such a reduction in the credit will have on their estates at death.

Stay tuned for ongoing updates regarding the status of the federal estate tax as Congress wrestles with it in the future.

Dan A. Penning