As reported in Money Adviser's Consumer Reports for June, 2010, the estate tax is gone for 2010, but you should plan for its return as well as other possible changes. 

With Congress focused so heavily on health-care reform this year, Consumer Reports explains that lawmakers neglected pocketbook issues such as the federal estate tax law.  Under current law, there is no federal estate tax in 2010, but it returns in 2011.  And when it does, it could hurt estates worth one million dollars or more.  Considering that an estate typically includes home equity, retirement accounts, annuities, investments, and life-insurance proceeds, many familes who are unsuspecting and do not consider that their estates could rise to the level of a million dollars might be shocked if rules are not changed.

Basically, the Economic Growth and Tax Relief Reconciliation Act of 2001 repealed the estate tax just for this year.  So, this means that the generation-skipping transfer tax is gone and the gift tax is reduced from 45 percent to 35 percent.  This change created many unintended and costly consequences.  Plus, more estates could owe estate taxes in 2011.  If Congress does not fix the law, the maximum federal estate tax will rise from zero to fifty five percent, with an additional five percent surtax for certain large estates.  But nothing is certain, and this uncertainty leaves many looking to do advanced planning confused with what is coming down the line.

What Consumer Reportsrecommended is that if your current net worth is one million dollars or more, have an estate attorney review the language in your estate plan.  One law professor interviewed in the article recommended that those individuals prepare a will that takes into account three options: (1) there is no estate tax at the time of death and one is not made retroactive; (2) there is no estate tax at the time of death but one is later made retroactive to January 1, 2010; and (3) there is an estate tax at the time of death, perhaps considering additional options based on the amount of the exemption.  Plus, he recommended that regardless of your estate size, do not ignore your other estate-planning issues.  Specifically, you should regularly review your will, power of attorney, health-care proxy, and other documents in order to make sure that your estate will pass the way that you want it to pass.