It now appears that no changes will be made to the Estate Tax system this fall. An article in the online magazine covering Washington, The Hill, says that insiders say Congress may pass a one year extension on the current rules and then deal with the problem next year as part of broader tax reform.

The problem is that the Estate Tax expires on 12/31/09. All through the year 2010, there will be no estate tax. But, the law phasing out the estate tax expires itself (“sunsets”) on 12/31/10, so as of 1/1/11 we will be back to the old Estate Tax system that was in existence in 2001 (prior to the phase-out law with the 10 year sunset provision). T hat had a 55% tax rate and a lifetime exemption of only $1 million.
If Congress had tried it could not have made a more complex and frustrating situation. No one is sure what the Estate Tax laws will be just a few months from now and everyone is even less sure what they will be a year from now. This makes it almost impossible to do reasonable and adequate Estate Planning.

Some logical proposals such as a 35% tax rate and a $5 million exemption have been put forward by Sen. Blanche Lincoln (D-Ark.) and Sen. Jon Kyl (R-Ariz.) but they were left out of the budget resolution. It is suggested that those concerned with this issue put pressure on their Members of Congress to deal with the issue as soon as possible.