On January 1, 2010, the New Year brought the death of the estate tax. For one year. Sort of. The levy which has been in place since 1916 and in 2009 claimed 45% of the amount of estates exceeding $3.5 million expired. What does that mean? Basically, Congress was unable to pass a new tax bill before the deadline. 
If they are unable to come up with a solution, in 2011, the estate tax will rear a new, and ugly, side. As the law stands today, in 2011, just $1 million will pass to heirs tax free, and bigger estates will be hit with a top estate-tax rate of 60%. For now, in 2010, your inheritance is subject to extra-capital gains tax if you inherit more than $4.3 million.
Realistically, Congress will quickly, and retroactively, reinstate the federal estate tax in a form very similar to the law that applied for 2009—that is, with a $3.5 million dollar exemption and a rate of 45%. The exemption could be as much as $5 million, and the rate might dip to 35%, but Uncle Sam will most certainly want his cut.
The bottom line is that the vast majority of Americans will be allowed to die estate-tax free in 2010. If the laws are reinstated, which is most likely, some Americans might have a smaller tax bill if they die in 2010 than they would have had they passed in 2009.
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