Humpty Dumpty sat on a wall and fell off. All the king's horses and all the king's men couldn't put Humpty together again. It has universally been assumed that Humpty was an egg, although I don't know for sure because I wasn't there.
EGGTRA, the Economic Growth and Tax Relief Reconciliation Act of 2001 has nothing to do with eggs - its objective was to wipe out the federal estate tax. EGGTRA provided that the federal estate tax would be reduced in steps (this year the first $3,500,000 of an estate goes free).
There would be no federal estate tax in 2010, and unless Congress acted before then, in 2011 the estate tax would revert to what it was in 2001. It was expected that Congress would act this year and vote to leave the estate tax as it is now - the first $3,500,000 of an estate is free of tax and the balance is taxed at 45% - or raise the amount which would go free - perhaps to as much as $10,000,000 per estate.
It was intended that EGGTRA would mark the end of the federal estate tax. However, EGGTRA may fall off the wall and break - pushed by the federal deficit which, over ten years, will be more than $9,000,000,000,000.
It is possible that Congress, pressed for revenue, will not vote this year or next, and will let the federal estate tax return to the 2001 level, with only $1,000,000 per estate being free of tax. Or, perhaps Congress will vote to establish the exempt amount at $2,000,000 as a compromise.
Most estate plans we have prepared for our clients will be tax-effective regardless of the federal estate tax level. We prepared these estate plans knowing that the law was going to change, and they will achieve the best results regardless of tax changes.
If you are a client of ours, we will notify you personally as soon as the law becomes clear. We will also write about the changes in NOTES.
If you have questions about your estate plan call us. You may also find it helpful to check our website, where we publish comments about the tax law and estate planning in more detail than is possible in NOTES.
