So where does the estate tax go from here? Senator Max Baucus, who is the chairman of the Senate Finance Committee, plans to introduce legislation early in 2010 to reinstate the estate tax. Baucus also seems determined to have the rates and exemption level stabilize: "It is an outrage that the Congress allows estate taxes to change so much," he said last week.
The tax is set to expire on January 1, and the new estate tax won't be settled until sometime thereafter. That has led some policy analysts to suggest that the tax couldn't be made retroactive, and any person who passes away during the first weeks of 2010 would end up not being subject to the tax. But that's not the case. For over a century, the courts have found retroactive taxes to be perfectly constitutional. They would surely find an estate tax, passed to retroactively cover what would be no more than a month or two, to be legal as well.
Even the Republicans have resigned themselves to an estate tax, suggesting a 35 percent rate on estates worth more than $5 million. The Democratic-controlled House has already passed a bill extending the current rate of 45 percent. Either way, it seems clear that you should expect to keep your estate plans in order and up to date, to ensure that your heirs will be treated fairly.
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