Serves me right, I go on a wonderful 10 day vacation from work and look what happens: Congress finally passes an estate tax bill. The full story is that the House has passed a bill that would permanently FREEZE the applicable exclusion amount (i.e., the amount that passes free of Federal estate tax) to 3.5 million and FREEZES the rate at 45%. The Senate will now take up the passed House bill. Then, if the Senate makes any changes, it goes to a conference committee.
The good news: Something may happen before the end of this year to end the uncertainty. AND the bill that passed the House does not change any other aspect of the estate tax laws (other than repealing carryover basis, which would have been a disaster anyway). Therefore, GRATS, valuation discounts and other estate planning tax reduction techniques are still viable.
The bad news: Anything can happen and NOTHING is permanent. Hence, Congress can still act before the end of this year to eliminate or restrict GRATS and valuation discounts. Clients should not be lulled into a false sense of security. Action should be taken as soon as possible before Congress closes the door on these techniques.