New York Times:  “A Congressional tax standoff has opened a window of opportunity for wealthy Americans determined to avoid paying up post-mortem.  With lawmakers unable to agree on a year-end fix for a quirk in the Bush-era tax cuts, the federal estate tax is set to be repealed for one year as of Jan. 1, meaning that those who suffer a timely death could escape the usual certainty of taxes. . . . While the tax is about to expire, it probably should not be buried just yet.  Democrats are vowing to resurrect it as soon as Congress returns in 2010.”

Wall St. Journal:  “The possible expiration of the federal-estate tax has sent the normally staid world of estate planning into a frenzy of activity, as taxpayers try to cope with uncertainty.  Without the old estate tax in place, some new rules will come into play, potentially forcing families to dig up decades-old records or face big tax penalties.  Some other onerous taxes will lapse, potentially cutting bills by two-thirds on transfers to grandchildren. And a debate is raging about whether Congress can pass a bill next year that would be retroactive to Jan. 1.  ‘These changes bring planning opportunities but also dilemmas, because we don't know what will happen,' said Carol Harrington, head of estate planning at law firm McDermott, Will & Emery.”

Nasdaq:  “House Democrats are retreating from a plan to move permanent estate tax legislation by the end of the year, spooked by high unemployment and budget deficits.  Members of the House Ways and Means Committee said that instead they hope to move legislation that extends current estate tax levels for one year. They could then revisit a permanent fix to the estate tax in 2010, when other tax cuts enacted under the administration of former President George W. Bush are slated to expire.”

Bloomberg:  “The imminent expiration of the federal tax on multimillion-dollar estates and a pledge by congressional Democrats to renew it retroactively next year marks a new phase in an ongoing battle over the levy.  Senate Finance Committee Chairman Max Baucus yesterday [December 16, 2009] said Congress will seek to restore the tax retroactively in 2010 after Republicans objected to his efforts to adopt a stopgap measure to extend the current law for three months.”

Forbes:  “Lawyers see litigation and administrative nightmares resulting from political impasse.  Barring a last-minute political deal, the federal estate tax is set to disappear as of Jan. 1, 2010–for just one year. Democratic leaders of Congress are vowing to resurrect the tax retroactively sometime next year, but the impending lapse has estate planners in a tizzy. They worry the lapse could turn into a nightmare for some families.  ‘We may have to change every other client document,' laments Carol Harrington, the head of the Private Client Group at McDermott Will & Emery.

Wall St. Journal:  “A key Democrat in the U.S. House of Representatives said he believes the estate tax will be repealed as scheduled Jan. 1, as House and Senate negotiators tried to strike a deal on a two-month extension to block repeal of the tax.  Rep. Earl Pomeroy (D., N.D.) said plans to include a temporary extension of the estate tax in end-of-year defense-spending legislation have been dropped because of Senate opposition.”

Washington Times:  “Battles under way in Congress and the courts.  As the end of 2009 draws near, Congress is racing to meet self-imposed deadlines to pass a climate bill and health care reform by the end of the year. But the clock is running out on another serious issue if Congress doesn't do anything to fix the law by Dec. 31.  Next year one of the most reviled and cumulative taxes in the federal code – the death tax – gets phased out pursuant to tax-cut legislation passed in 2001. The death tax, politically known as the estate tax, is set to disappear for one year at the end of 2009 if no congressional action ensues before then.  But this victory is fleeting, and, like a creature in a late-night horror movie, the death tax comes back with a vengeance in 2011 at its 2001 rate of 55 percent.”

Washington Business Journal:  “The House passed legislation that would permanently extend this year's estate tax rates and exemptions, but the Senate may not act on the bill before Jan. 1.   If an estate tax bill isn't enacted by then, the federal tax on inherited assets would go away in 2010.  The tax, however, would be scheduled to return in 2011 at much higher rates and lower exemptions. . . . it's not clear whether that chamber will address the estate tax's future before the end of the year.”

Wall St. Journal:  “In less than three weeks, the hated death tax is scheduled to expire—with the rate falling from 45% to zero for 2010.  Then the tax will be resurrected in 2011 at a rate of 55%.  This bizarre policy dates back to 2001 when Democrats wouldn't let President Bush permanently kill the death tax, so Republicans bet that if the tax were eliminated for one year, it would never come back. . . . most Americans think that it is immoral for the government to confiscate the fruits of a life's effort merely because of the fact of death.”

Commerce Clearing House prepared a summary of the recent federal estate tax bill passed by the House of Representatives on December 3, 2009.  The bill is called the Permanent Estate Tax Relief for Families, Farmers, and Small Business Act of 2009.  CCH has issued a Special Tax Briefing on the House bill's provisions which, if adopted by the Senate, will provide certainty for estate taxes and estate planning, largely by freezing the status quo as of this year.   The bill provides:

• $3.5 million estate tax exclusion amount
• Top estate tax and gift tax rate of 45 percent
• Not indexed for inflation
• No portability of spouse’s unused exclusion
• Continuation of stepped-up basis
• Permanent repeal of state death tax credit

Wall St. Journal:  “Republicans are hoping the looming expiration of the federal estate tax will force Democrats to agree to a compromise that would be more generous to taxpayers than the latter might prefer.  Regardless of the outcome, the estate-tax debate appears likely to go down to the wire, perhaps Christmas Eve.”  See also “Congress grapples with estate tax.”

Wall St. Journal:  “The House voted to permanently extend current estate-tax levels and prevent a repeal of the tax scheduled to be in effect next year.  The legislation, which passed 225-200, protects estates under $3.5 million, or $7 million for married couples, from the tax. It taxes inherited wealth above that amount at 45%.”

The Associated Press has the latest in the continuing saga of Congress' starts and stops at amending the federal estate tax law.

Nasdaq:  “A bipartisan group of senators who favor lowering estate taxes are studying a proposal to gradually reduce the tax until it reaches 35% in 2019.   The senators, led by Sens. Jon Kyl (R., Ariz.), and Blanche Lincoln (D., Ark.) , have long sought to cut the tax from its current level of 45%, and exempt more small businesses and estates from the tax.”

National Underwriter:  “Association for Advanced Life Underwriting officials believe that before Congress recesses it will extend the 2009 estate tax levels for another year, but won’t deal with permanent reform until next year.  Tom Korb, AALU vice president of policy and public affairs, made his cautionary comment in the wake of statements by House Democratic leaders pledging to enact legislation before the end of the year that would extend indefinitely the 2009 tax levels.”

Trusts & Estates:  “Don’t bet on any.  Congress just might do nothing and send us back to the 2001 scenario—permanently. . . . The landscape in which all wealth advisors manage trusts and create estate plans is about to be altered dramatically.  But those changes may not be the ones everybody is expecting.   I talk to many colleagues about estate tax reform and everyone says that the federal lawmakers ‘have got to do something.'   But do they?”

North Jersey.com:  “With all the hoopla coming out of Washington regarding the health care overhaul, not much attention is given to the fact that a hefty tax is scheduled to take a siesta in 2010.  George W. Bush and the Republican Congress in 2001 tried to kill the estate tax, which they liked to call the ‘death tax.'  However, they could not get the 60 votes required in the Senate, so, instead, they scheduled declining tax rates and increasing exemptions from the tax through 2009 with a zero estate tax in 2010.

Under current law, the exemption amount from the estate tax in 2009 is $3.5 million, which removes all but a few estates from Uncle Sam's tax.  However, the exemption amount is scheduled to fall back to $1 million in 2011 and the tax rate will go back to 50 percent.  It would be a safe bet to wager that Congress will borrow an idea from Rahm Emanuel and, ‘Never let a crisis go to waste.'  Currently, there are three major bills in Congress dealing with a ‘fix' of the estate tax.”

Wall St. Journal:  “Changes in the Way Inherited Assets Are Valued Could Cost Heirs and Cause Hassles – Many people hope the federal estate tax will disappear next year, as scheduled. They could be sorry if it does.  Back in 2000, Congress enacted a gradual loosening of the estate exemption. It has since risen to its current level of $3.5 million per individual, or up to $7 million per couple. The tax is scheduled to lapse just for next year and return in 2011.”

New York Times:  This October 22, 2009, story summarizes the recent history of the federal estate tax and includes a graph that shows the historical relationship between the estate tax exemption amount and the percentage of deceased Americans who are subject to the tax.