Federal Estate Tax Predictions

I've been trying to keep you updated on the state of the federal estate tax, without reporting every blip and beep on the radar. However recent comments from Rep. Sander Levin, House Ways and Means Committee head, are worth paying attention to.

Here's what Levin said: he suggested that the federal estate tax will be reinstated this year, at 2009 levels. This would mean the estate of anyone who dies in 2010 - even those who have passed away before the tax is actually made law --will be taxed if in excess of $3.5 million.

What I do know with certainty is that families whose loved ones died before the tax was reinstated, will probably not give up their windfalls without a fight.  For example, Houston billionaire Dan Duncan died on March 28. If Levin's prediction comes to pass and the estate tax is imposed retroactive to Jan. 1, do you think the family is going to go meekly into the night and pony up $4 billion to Uncle Sam? Of course not.

If Levin's prediction does NOT materialize and Congress does not resolve the estate tax issue this year, the federal estate tax will, by law, come boomeranging back on Jan. 1, 2011. If that is the scenario, the maximum tax will be 55% and apply to any estates over $1 million. More to come...