The Repeal of the Federal Estate Tax

Well, it's the end of the first quarter of 2010, and Congress still has not dealt with the repeal of the federal estate tax. It's beginning to look like Congress may not actually deal with the estate tax here in 2010 at all. Each of the major parties actually has a vested interest in not dealing with the repeal of the estate tax, and the coming reduction of the federal estate tax exclusion to $1 million beginning in 2011. The members of Congress with a "D" after their names are interested in raising more revenue to support all of their programs that they have enacted so far this year, and intend to enact in the future as well.   Members of Congress with an "R" after their names will want to use the issue of the federal estate tax to raise revenue for the November midterm elections.

It would appear that one of the more likely outcomes will be that neither party will do anything about the federal estate tax this year, which will lead to a rollback to the exclusion levels to $1 million next year. Because of this, anyone holding large amounts of life insurance in their estates should consider moving that life insurance out of their estates into any revocable life insurance trust before next year arrives. With proper planning, the entire value of the life insurance would not be subject to the increased estate tax coming next year.

Just a few random thoughts.