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Federal Estate Tax in Limbo for 2010

1-1-2010 The federal estate tax expired Jan. 1, 2010. But chances are the tax will be back, perhaps very soon.

Given the state of the economy, most experts believe Congress will reinstate the tax in some form once it returns from recess. In 2009 the exclusion was $3.5 million with a tax rate of 45%; it remains to be seen if Congress will stick with that formula. If Congress does act, the tax could conceivably be made retroactive to Jan. 1, 2010. So, for example, if Congress votes to reinstate the tax on February 1, 2010, it may still apply to those dying with taxable estates from Jan. 1, 2010 through Jan. 31, 2010.  

Current law provides for the federal estate tax to return, with an exclusion of $1 million and a top tax rate of 55%, effective Jan. 1, 2011. Again, we do not know if or when Congress will act with respect to 2011.

All this uncertainty means that those with significant estates need to include maximum flexibility in their estate planning. More information on federal estate taxes.

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