House Passes Amendment To Estate Tax Law

Yesterday, the U.S. House passed H.R. 4154 by a vote of 225-200. No republicans voted for this bill. As I expected would happen before year end, Congress is pushing for a continuance of the current $3.5 million federal estate tax exemption. H.R. 4154 extends the current exemption of $3.5 million per person indefinitely. If this bill becomes law, the current elimination of estate tax in 2010 and resurfacing of a $1 million estate tax exemption in 2011 will not occur.

For estates that exceed $3.5 million, the estate tax rate will be 45%. This means that for every dollar a deceased person's estate exceeds $3.5 million, the estate will owe $0.45 to the IRS. Also, H.R. 4145 does not include a provision related to portability of estate tax exemptions between spouses. This means that lawyers must continue to use flexible trust plans that create bypass trusts upon the first spouse's death to utilize both spouses' exemptions.

As we approach the reality of no estate tax in 2010, Congress is nearly certain to pass this legislation. I suspect the U.S. Senate will take up this bill quickly and send a final version to President Obama for signature. During his campaign, President Obama spoke of his support for a $3.5 million estate tax exemption and this bill aligns itself perfectly with his position.

By Michael W. Vogel