In quantum physics, the Heisenberg Principle states that certain pairs of physical properties, like position and momentum, cannot both be known to arbitrary precision. That is, the more precisely one property is known, the less precisely the other can be known.
Theoretical physicists may be comfortable with uncertainty, but as an estate planner I am not. Congress some time ago passed a law that states that the federal estate tax will be repealed at midnight on December 31, 2009, and will be reborn at midnight on December 31, 2010.
We have been waiting for Congress to act with respect to the federal estate tax. Congress is not going to let the tax expire six months from now. The Treasury's demands for funds are enormous, and letting the federal estate tax expire would be political suicide.
Since we do not know what the law will be in a year from now, we have to guess. Here is my best guess.
The estate tax will be continued with an exclusion for the first $3,500,000 of assets in an estate. The exclusion will be "portable" so that if a married person does not use the whole $3,500,000 the unused portion will pass on to the surviving spouse.
Good news comes at a price, and the price is probably going to be that minority discounts on closely held stock will in some measure be disallowed. Thus, family limited partnerships and the like will no longer be available as tax-saving devices. The use of grantor retained interest trusts and their progeny will probably be curtailed. Congress may even overturn the Crane case, decided 50 years ago, which allowed non-recourse debt to be included in basis.
If your estate may be subject to federal estate tax, you should review your estate plan and proceed immediately to set up a family limited partnership or other tax-saving device if needed. Tax-saving devices that are valid now may be safe - Congress could ban those devices retroactively, but probably will not do so.
