It is now October 31, 2010, and two months from today The Economic Growth and Tax Relief Reconciliation Act of 2001 rides into the sunset. As any estate planning attorney would have told you at the time the law passed, The Economic Growth and Tax Relief Reconciliation Act of 2001 was thelegislation in which Congress abolished the Death Tax. The law provided that the Federal Estate Tax would phase out over the next decade, and the $1,000,000.00 estate tax exemption would gradually grow in size until it reached $3,500,000.00 in 2009 and became unlimited in 2010.
See Is There Any Such Thing As Estate Taxes
The only problem was that technically the change was not permanent. In order to meet the definition of being revenue neutral Congress had to provide that the law would end after a ten year period, and in 2011 the $1,000,000 exemption would return, leaving anyone dying after this year subject to the dreaded Death Tax.
Of course everyone realized nine years ago that the abolition of the Federal Estates Tax would really be permanent. They knew that sometime in the interim Congress would remove this ridiculous little sunset provision, and no one would ever really have to worry about Death Taxes again.
A funny thing happened though after the 2001 law passed. The economy suffered some setbacks, and the budget surplus, which the big supporters of the abolition of estate taxes believed would go on forever, turned into a rapidly growing deficit. Funding a permanent change began to look more difficult, and when all was said and done Congress never followed through.
There are some, who are still predicting a last minute action by Congress, but even most of the optimists only expect a $3,500,000 exemption. What is certain is that a lot more individuals dying after January 1, 2011 are going to be subject to Estate Taxes and Estate Planning has now become urgent.
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