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Davidow, Davidow, Siegel & Stern, LLP
Long Island's Elder Law, Special Needs & Estate Planning Firm

Monday, November 9, 2009

Representative Berkley Introduces H.R. 3905 to

Under current law, the estate tax is slated for one year of repeal in 2010 (approximately two months from now), with a return in 2011 at the rates and exemption level that were in effect in 2001 ($1 million exemption). Recently introduced H.R. 3905 would eliminate 2010's one-year repeal, and would gradually increase - over a 10-year period - the Federal estate and generation-skipping transfer tax exemptions to $5 million. The bill also would reduce - again over a 10-year period - the maximum rate of tax (now 45%) to 35%. The deduction for state death taxes would be phased out over the same period. In a bipartisan effort, H.R. 3905 was introduced by Rep. Berkley (D-NV) who was joined by co-sponsors Brady (R-TX), Davis (D-AL) and Nunes (R-CA).

The increase in the amount of the Federal estate tax exemption would be phased in at the rate of $150,000 per year as follows:
2009 $3,500,000
2010 $3,650,000
2011 $3,800,000
2012 $3,950,000
2013 $4,100,000
2014 $4,250,000
2015 $4,400,000
2016 $4,550,000
2017 $4,700,000
2018 $4,850,000
2019 and thereafter $5,000,000

In the case of any decedent dying after 2019, the $5,000,000 exemption amount would be indexed for inflation. The amendment would apply to estates of decedents dying and gifts made after December 31, 2008.

The maximum estate and gift tax rates would be reduced at the rate of 1 percent per year over 10 years as follows:
2009 45%
2010 44%
2011 43%
2012 42%
2013 41%
2014 40%
2015 39%
2016 38%
2017 37%
2018 36%
2019 and thereafter 35%

The deduction for state death taxes would be phased out over 10 years by reducing the allowable percentage of the current deduction over that period as follows:
2009 100%
2010 90%
2011 80%
2012 70%
2013 60%
2014 50%
2015 40%
2016 30%
2017 20%
2018 10%
2019 and thereafter 0%

It remains to be seen if this will pass. We’ll keep you posted!