The estate tax is a focus for many advisers like Annino. The Bush cuts steadily pared the rates and increased the exemption, which is the dollar amount at which an estate qualifies to be taxed. Last year, estates under $3.5 million were exempted. In 2010, the tax lapsed entirely. It resumes next year, when the top rates on estates of more than $1 million will be 55%.
The Republicans' election gains, including a new majority in the House but not the Senate, have some people predicting renewed tax relief. Some even talk boldly of an estate tax exemption of between $5 million and $10 million. Others completely disagree.
The fate of the tax is now "completely up in the air," according to Alfred Peguero, partner, personal financial services at PwC. It is possible that Congress won't act in time to stop the $1 million exemption from taking effect in 2011. In that case, many, many more people will fall under the estate tax.
"That's a house and a retirement plan for many people," said Peguero.
For anyone with an estate between $1 million and $3.5 million, it is not a good idea to sit on the fence. These people, says Rowsell, Ga. estate planner John Scroggin, are in the danger zone and need to think about tax-saving measures. For example, he says, they should think about transferring a big life insurance policy out of the estate and into the hands of children or other relatives.
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