Ben Franklin is credited with the quotation, “In this world nothing is certain but death and taxes.” Ironically, few things are as uncertain these days as death taxes. The federal estate tax and generation-skipping tax “officially” expired on January 1, 2010, under laws enacted in 2001. But these taxes are merely “hibernating,” and if Congress fails to act, repeal will last only through December 31, 2010. Estate and generation-skipping taxes are both scheduled to return in 2011, and tax exemptions will shelter only $1 million, compared to $3.5 million in 2009. The highest tax rate would become 55% for gifts, estates and generation-skipping transfers, compared to 45% last year. (The federal gift tax remains in effect for 2010, with a top tax rate of 35%, a $1 million lifetime gift tax exemption, and a $13,000-per-donee annual exclusion).

The current state of affairs has created concern and confusion for estate planners, small business owners, individuals and families. Congress may reinstate estate taxes for 2010 – possibly retroactive to the start of the year. But no one can predict what members of Congress will do, when they will do it, or if proposals such as restoring transfer taxes retroactively will hold up in court. The best advice is to check with your professional advisers. Some people may have wills or trusts that distribute assets under “formula” clauses linked to federal estate tax exemptions or rules that no longer exist. These estate owners should see their attorneys at an early opportunity. Capital gains taxes, for people who die in 2010, could afflict heirs and beneficiaries on capital appreciation over $1.2 million (surviving spouses receive an additional $3 million capital gain exemption).

Note: Many states impose “death taxes,” and you should check with your advisers if you own property in any of these areas: Connecticut, Delaware, District of Columbia, Illinois, Indiana, Iowa, Kansas , Kentucky, Maine, Maryland, Massachusetts, Minnesota, Nebraska, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Virginia and Washington. In general, state death tax laws allow deductions for property passing to qualified organizations, such as the American Red Cross.

To learn more about Gift Plan options, contact the Gift Planning Office at 1-800-797-8022, ext. 5, plndgiving@usa.redcross.org or log on to www.redcrosslegacy.org.