The tax compromise bill survived a last minute amendment and was passed by the House last night around midnight eastern time. It will now head to the President, who is expected to sign it today. Nation & World | Bill preventing big tax hikes heads to Obama Fri. | Seattle Times Newspaper
While it generally extends the current Bush era tax provisions, it does create new law for estate, gift, and generation skipping transfers. Under prior law there was no estate tax on those dying in 2010; however, there was a gift tax on lifetime transfers exceeding $1 million. Under the new law there will be an estate tax for 2011 and beyond, but the first $5 million will be exempt from taxation. The estate tax and gift tax exemptions will again be unified, meaning that lifetime gifts of up to $5 million will be exempt from taxation. Additionally, the tax rate has been lowered to 35%.
Well the new estate tax provisions are not as generous as the law in place this year, they are more generous than the alternatives and will most likely be welcomed by taxpayers. However, due to the temporary nature of this bill (2 years only), prudence requires taxpayers with estate greater than $1 million to continue to complete estate tax planning. The increase in gift tax exemption creates an unique planning opportunity that could be gone in two years. So the new mantra of this law is use it because you may loose it!