Estate Tax

BUT -- of course your estate still might have a state estate tax. Also, of course, we don't know what the heck Congress is going to do about the estate tax. Neither do they, which is really scary. They may well do something retroactive to January 1, 2010 in which case, your estate will owe an estate tax after all.

And, if we do nothing? Well, then on January 1, 2011 we revert back to the old estate and gift tax law we had in 2002. If so, the law will be that there will be no estate tax on the first $1 million in estate assets; anything above that will be taxed at the maximum draconian rate of 55%. [The rules will be the same for the gift tax, except a different tax rate, but that's another issue.]

And, that potential 55% rate is on top of any estate tax your state my impose. Wow, whopper of a tax, imposed on our assets -- after we die. Hence, the reason some call it the "death tax."

Most assume Congress will do something to raise the estate tax exemption level at least. After all, it was as high as 3.5 million just last year. But, then again, no one thought Congress would let the estate tax expire on December 31, 2009 -- but they did.

Obviously, this is a nightmare for the prudent estate planner -- trying to predict what the politicians in Washington DC will do. Probably the most prudent course is to assume the $1,000,000 credit and 55% tax rate currently in the works and take appropriate steps. Of course with a $1 million threshold, many, many people need to be concerned about taking steps to minimize their estate tax.

You can read more about the estate tax and how to limit or avoid it at estate tax.

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