This week, the US House of Representatives voted to make permanent the current estate tax exemption and rate. It is: exemption of $3.5M per person with 45% federal estate tax on assets more than this. The bill now goes to the Senate where it will face challenges to be lowered to $5M and 35%. Let’s hope the “world’s greatest deliberative body” can change the bill to something considerably less onerous. If the bill is not passed before year end, we have:

• 2010: no estate tax. (the reason congress is rushing to pass new estate tax legislation)

• 2011: A $1M exemption and 55% tax.

Some data points:

• many states have an estate tax as well. So you can count on losing over half of your assets over the exemption amount ($3.5M per person / $7.0 for married couples).

• This tax is characterized as being unfair to small business owners because a significant chunk of their life’s work is donated to the government as opposed to passed on to family.

• The federal estate tax would generate approx $25B per year in tax revenue (at 2009 rates). A drop in the bucket on an annual deficit of over $1T, but every $25B counts.

• Approx 0.2% of the population would be stuck paying this $25B annual tab.

Having a permanent estate tax regime makes estate planning easier and more effective. 2010 should be a good year for estate attorneys.