In this post election year, the future of the federal estate tax is truly up in the air. Currently the federal exemption from estate taxes and estate tax rate are supposed to change as shown below in the Current Federal Estate Tax Schedule.
This schedule poses a problem for estate planning attorneys and their clients - what should be the plan in this year of uncertainty and for the next few years?
Is the Federal Estate Tax Really Going Away?
In light of this uncertainty, President Obama has expressed his concerns about full repeal of the federal estate tax that's scheduled to take place in 2010. Instead of full repeal, Obama supports carrying over the current $3,500,000 exemption and 45% estate tax rate at least through 2010. The worst case scenario is that this could be the result of a "one year patch" implemented by Obama and Congress in 2009, which will leave the future of the estate tax beyond 2010 still up in the air.
What You Should Do
Suffice it say that in these trying economic times, it's clear that the federal estate tax won't be going away any time soon. But don't use this uncertainty as an excuse to put off making or updating your estate plan, because the consequences of not having a plan, or having an outdated plan, are simply too great. The beauty of estate planning is that estate plans can be made flexible enough to change as your life and the laws change.
The other thing to consider is where you live since currently 18 states and the District of Columbia collect an estate tax at the state level and seven states collect a state inheritance tax (Maryland and New Jersey are the only two states that collect both types of taxes):
State Estate Tax ChartState Inheritance Tax Chart
Unfortunately, no one can predict the future and if and when someone will become disabled or when someone will die. If you don’t have a disability plan, then you and your property may end up in a court-supervised guardianship or conservatorship, and if you don’t have an estate plan, then your loved ones won’t know what you really wanted and your property may go to someone or somewhere that you wouldn’t have chosen had you taken the time to make a plan. Be smart - make an estate plan, or update your old and outdated plan, to protect you and your loved ones.
Chart Showing Federal Estate Tax Exemption: 1997 - 2009
Current Federal Estate Tax Schedule
| YEAR | EXEMPTION | TAX RATE |
| 2009 | $3,500,000 | 45% |
| 2010 | NO ESTATE TAX | N/A |
| 2011 and beyond | $1,000,000 | 55% |
