You've probably heard about the bill being hotly debated in Congress right now that would reinstate the federal estate tax (from it's current status of repeal) at a 35% rate on estates larger than $5 million ($10 million for married couples). Current reports are indicating that this bill will most likely pass. (Get more information about the bill here.)
What does this mean for you?
If the bill passes, and you and your spouse have an estate (real property, bank accounts, retirement accounts, life insurance, business interests, stocks, bonds, cars, boats, ATVs, etc.) that is less than $10 million, you will likely pay no estate tax if you die in 2011 and beyond (unless Congress decides to change things again). For married couples with estates larger than $10 million, you will be taxed at a 35% rate on everything over that number at the death of the second of you to die. This is good news for many of you.
If this bill does not pass, and you and your spouse have an estate larger than $1 million, you will be taxed at a 55% rate on everything over $1 million. Once you factor in the proceeds of life insurance and retirement accounts, most of you will probably find that your family will be facing a federal estate tax bill upon your death.
What is going to happen in the end? Your guess is as good as mine. If the bill passes, there are a number of my clients who will be very relieved as a result of the estate tax break that it represents.