Until the end of 2009, the inheritance tax, also referred to as the estate tax, stands at 45 percent for estates over $3.5 million. The tax will sunset at the end of the year, for one year only. It will then be reinstated in 2011 at the rate of 55% with an exemption of $1 million.
It is still unclear whether the tax will be repealed in 2010. Earlier this month, the House passed a one-year extension of the tax, essentially freezing it at current levels until 2011. The House has also passed smaller extensions, from one to three months, in an attempt to give the Senate time to come up with a more permanent solution.
However, the Senate has, at this point, not passed any legislation dealing with the estate tax. Senate lawmakers recently rejected a one-month extension of the tax. Democratic leadership has promised to take up the issue in the new year and may pass an extension that applies retroactively to January 1, 2010.
This uncertainty could make estate planning somewhat more difficult for individuals with large estates, as the Senate continues to deliberate. Some estate planning professionals are advising a “wait and see” approach. But for those who need to settle affairs quickly, the decision about how to handle a large estate may be more complicated. An estate planning or elder law attorney can advise on the best way to handle this delicate situation.
Bernard Krooks is a New York Estate Planning lawyer with offices in White Plains, NY and New York, New York. To learn more, visit http://www.littmankrooks.com.