It looks as if the long and weary road to estate tax clarity ended on 12/17/2010 when President Obama signed the compromise tax package negotiated with Republican leaders.

Here are some quick highlights:

Tax Election for 2010 Estates: This is one of the biggest parts of the deal. The bill gives 2010 estates the choice of whether to use 2010 or 2011 tax rules. This is good news because  it gives the estates of persons who died in 2010 a choice whether to be reated under the “old law” (with less favorable capital gains features but an unlimited estate tax exemption) or under “new law” (with more favorable capital gains features and a generous $5 Million/person estate tax exemption).

 Unification of the Estate, Gift, and Generation-Skipping Taxes: In recent years the gift tax and estate tax exemptions have been different, complicating succession planning for family businesses and other matters. With the new deal, however, there will be a simple $5 million per-individual exemption for  both gift tax and estate tax.  The unused gift tax exemption could later be used upon death.

And of course we can’t have a conversation about estate taxes without discussing Effective Date and Duration: The effective date of the new provisions is set to be January 1, 2011.  However, the new law only has a two (2) year term and then sunsets as of 12/31/2012.   What this means is that the new tax package may be only a temporary reprieve, and we could be going through all of this again in 2012-2013.

Stay tuned. We will be writing more on this topic very soon.