Last week’s Wall Street Journal included Laura Saunder’s good, concise article: Will the Estate Tax Disappear? The article is short and worth reading, but here are the points I find most important:

•    Elimination of step-up in basis at death–which is tied to elimination of the estate tax in 2010 under current law–would impact a lot more people than does the estate tax.  Instead of getting a new fair market basis in inherited property, heirs would have to figure out the basis of the property in the hands of the deceased person.  I hope he or she kept good records.  In reality, it would seem impossible to determine carry-over basis in many cases, and at best a lot of errors would result.

•    The Baucus Senate bill discussed in the article could accomplish some good things.  Not only would it peg the estate/generation-skipping exemption at $3.5 million (with adjustments for inflation), it would bring the lifetime gift tax exemption (currently $1 million) into alignment with the other two, unifying the system.  The bill also promises to allow married individuals to make full use of their exemptions without having to create and fund credit-shelter trusts.

•    The “cost” of any legislative fix to the estate tax shuffle (gone in 2010, back with a vengeance in 2011) is likely to include tighter restrictions on common estate freezing and discounting techniques.

This article concludes as do most:  it’s not likely that any legislation will pass before the end of the year.  But, as the author points out, that won’t stop Congress from taking action next year retroactive to January 1, 2010.

Thanks to Northwestern Mutual advisor Dan Smith for directing me to the article.