Estate Tax Relief Maybe in the Offing

During the year 2010, there has so far been no federal or Arizona State estate tax. However, barring action by Congress before the end of the year, the estate tax is scheduled to return on Jan. 1, with an exemption of only $1 million per person and a maximum rate of 55 percent.

I have good news to share with you. The long wait for action to address the unknown status of the federal estate tax may be approaching an end. President Obama has announced a tentative deal with Congressional Republicans earlier this week, which, if finalized, will result in a number of tax benefits, including addressing the estate tax.

In the deal, President Obama made substantial concessions to Republicans. In addition to dropping his opposition to any extension of the current income tax rates on incomes above $250,000 for couples and $200,000 for individuals, he agreed to a deal on the federal estate tax that infuriated many Democrats. The deal would ultimately set an exemption of $5 million per person, and a maximum rate of 35 percent — a higher exemption and far lower rate than many Democrats wanted.

A New York Times article cautioned, however, that the deal is not supported by all parties, and many key Democrats have vowed to fight it. So, resolution may be within sight, but it is not yet a finalized deal.
“The House Democrats have not signed off on any deal,” Representative Chris Van Hollen of Maryland, who has been representing House Democrats in formal negotiations on the tax issue, said Monday night. “We will thoroughly review and discuss the proposed package in the caucus.” Some senior Democrats said an agreement by President Obama to accede to Republican demands on the estate tax could lead to a revolt among lawmakers.

With this positive news in the air, it may be time to schedule a meeting to adjust your estate plans to maximize the impact of this likely change in the federal estate tax law.