I had previously reported that a one-year extension of the federal estate tax seemed likely in an end of year defense spending bill. Now, Hani Sarji reports that it is likely Congress won't act this year, but will act next year and reinstate the estate tax to January 1, 2010 in some form.
In Estate Tax Fix Fails, Repeal Likely - US Lawmaker (Dow Jones Newswires, 12/15/09), Martin Vaughan reported the following:
Rep. Earl Pomeroy (D., N.D.), said plans to include a temporary estate tax extension in end-of-year defense spending legislation have been dropped because of Senate opposition.
As a result, he told Dow Jones Newswires, the estate tax will be repealed on Jan. 1 as foreseen by current law, and replaced with an onerous capital gains tax that heirs would have to pay when they sold any inherited assets. . . .
It is regrettable that we're going to have this disruptive period without a permanent resolution," Pomeroy said.
But he said "the prospects are 100%" that Congress will come back next year and reinstate the tax, and make it retroactive to Jan. 1, 2010.
My issue with repeal and retroactive reinstatement is what happens to the person who dies before the reinstated law is passed? From a planning perspective, I know Congress won't leave well enough alone, and the reinstated law will not be identical to the current law, which means that for the person who dies during the gap time will have lost an opportunity to fully plan their estate. See a prior post on my other thoughts on retroactive estate tax reinstatement.