With the clock ticking toward expiration of current law in 2010, at least 15 bills have been filed in Congress this year to either repeal or modify the estate tax.
However, despite this pressure, officials of life insurance agent groups say the current unsettled picture is likely to remain the status quo until next year.
The deadline deals with expiration of the estate tax provisions of the 2001 Economic Growth and Tax Relief Reconciliation Act of 2001, or EGTRRA, which are due to sunset at the end of 2010, with full repeal of the estate tax scheduled to last only for the year 2010.
If Congress does not change the law before it expires, then on January 1, 2011, estate and gift tax law will return to what it was had EGTRRA never been enacted.
The unified estate and gift tax will be reinstated with a combined exclusion of $1 million. The maximum tax rate will revert from 45% in 2007-2009 to 55%.
According to a recent report from the Congressional Reporting Service, the large year-to-year differences in the estate tax law mean that wealthy individuals face a wide and erratic variation in their potential estate tax liability over the next 4 years, 2008-2011, depending upon the year they happen to die.
"While there is urgency to resolve this issue before the year of repeal in 2010, the Senate Finance Committee already has a full agenda and it would not be surprising to see movement postponed until 2009," says David Stertzer, CEO of the Association for Advanced Life Underwriting.
In any case, "we should see several 'bed-check' votes throughout the course of the year," Stertzer adds.
He says he believes "2009 will be a decisive year, and given the high cost associated with any reform proposal, it is unlikely that Congress will support any reform higher than a freeze of the 2009 level."
Michael Kerley, senior vice president and chief federal lobbyist of the National Association of Insurance and Financial Advisors, adds that there is a "reasonable possibility that Congress will reform the estate tax before 2010–the one year complete repeal is scheduled to occur."
He says NAIFA and its agents favor reform rather than repeal. As pointed out by the CRS report, if not modified, the 2001 version of the estate tax will be reinstated in 2011, Kerley says. "Before that deadline, NAIFA supports adopting a reform proposal that is fiscally and politically sustainable out into the future."
Complete repeal "is not politically sustainable long term because it is simply too divisive politically," he says.
