The House's decision to extend the current estate tax regime did not come as a surprise to industry observers, who never believed the government would allow the tax rules to expire altogether and give up the much-needed revenue.
Presently, the tax rate — for 2009 only — is 45% for individual estates worth over $3.5 million. This "death tax" is set to be repealed for all of 2010 and then will ratchet upward in 2011 to 55%, with a $1 million exemption. That is unless the Senate takes up the issue.
"Unless Congress does something, we'll have this weird whipsaw," said David A. Handler, a partner in the trusts and estates practice group of Kirkland & Ellis.
"If you happened to die in one year rather than the other, you'd have vastly different results."
The House voted 225-200 on Thursday to extend the current estate tax. The exemption for married couples is $7 million.
"We can plan for anything as long as we know what we're planning for," said Warren Racusin, the chairman of Lowenstein Sandler's trusts and estates practice group.
"There has been no certainty on what the estate tax was going to be, whether there was going to be a tax and how extensive it would be if there was one."
Under the House's plan, the tax is likely to affect only 0.25% of Americans.
Some Democrats believe the government should revert to higher estate tax rates; if the current House bill passes in the Senate, the government stands to lose approximately $234 billion in revenue over 10 years.
