The House voted to set the inheritance tax at 45 percent permanently for estates larger than $3.5 million.

Bill Smith

The estate tax is set to expire next month and disappear temporarily next year, only to return at a higher rate of 55 percent in 2011. All estates of whatever size will be subject to a 15 percent capital gains tax rate unless the legislation passes. The bill, which was approved by a vote of 225-200, would continue to exempt estates of less than $3.5 million.

Married couples with estates of $7 million would be exempted through estate planning, leaving less than 1 percent of estates subject to the inheritance tax. Republicans had pressed to eliminate the estate tax completely, but that effort was rebuffed as Congress also tries to tackle the budget deficit.

“Few tax professionals or estate planners expected the estate tax to disappear in 2010,” said Bill Smith, director of the national tax office at CBIZ Mayer Hoffman McCann. “Those who planned ahead and took advantage of the depressed asset values and low interest rates will be ahead of the curve, while those who were waiting until after the 2010 to do their estate planning will be scrambling. The takeaway is that now is the best time in recent history to do estate planning, especially since the tax is not going away.”