| NEW YORK
NEW YORK Ben Franklin observed that nothing can be said to be certain except death and taxes. Thanks to Congress, you can strike taxes from that short list.
Political stalemate has made 2010 the year without an estate tax, which means multimillionaires who died this year can pass on all their wealth without paying a penny to Uncle Sam.
Yet the odds of Congress reinstating the tax this year, while increasingly slim, are putting windfalls on hold.
"People act like a deer in headlights. They don't know what to do in view of the uncertainty," said Jeremiah "Jere" Doyle, a senior vice president at BNY Mellon Wealth Management.
The deaths of Texas pipeline billionaire Dan Duncan, New York Yankees owner George Steinbrenner and other immensely wealthy people this year drew attention to a gigantic hole in the U.S. tax net: no levy on multimillion-dollar estates for the first time since Teddy Roosevelt was in office.
A package of 2001 and 2003 Bush tax cuts expire this year and have not yet been replaced. The estate tax, which fell to 45 percent on assets over $3.5 million for individuals, disappeared this year.
The House last year approved a bill that would have extended the tax at the 2009 rate, but the Senate has failed to pass its own bill.
If Congress does nothing this year -- more likely with each passing week -- the estate tax rate will jump to 55 percent with a $1 million exemption.
"This might be the best year to die of all time, though that remains to be seen," mused Steven Lavner, a senior vice president in U.S. Trust's national wealth strategies group.
A contentious issue in any environment, the estate tax has proven to be especially ticklish during a recession leaving one in 10 Americans unemployed and the deficit soaring. Advocates for the tax say it is the most progressive revenue source out there, affecting about one-fourth of 1 percent of taxpayers.
Farm and small business owners meanwhile have lobbied against the levy, calling it a "death tax" and unfair.
Last month, independent Senator Bernie Sanders co-sponsored a bill that would impose taxes of 55 percent and as high as 65 percent, with a $3.5 million exemption. The Sander bill would make the tax effective to the beginning of 2010.
On the other side of the spectrum, a bipartisan bill from Senators Blanche Lincoln and Jon Kyl would set a 35 percent rate with a higher $5 million exemption.
Early this year, financial planners said it was unthinkable Congress would not reinstate the tax this year.
Today, tax experts say they would be surprised to see lawmakers, who just commenced a six-week recess and who have elections looming in November, enact a new tax this year.
"We're past the midpoint of the year. It's looking less likely that there will be a retroactive tax," Lavner said.
Wilmington Trust estate planning expert Carol Kroch said many estates are putting off distributions until later this year, given the uncertainty.
"We don't really know what's going to happen," she said,
Estates may still pay out some assets but keep at least 55 percent in reserve in case Congress does act.
Bill Fleming, a PricewaterhouseCoopers financial planner in Hartford, Connecticut, said likewise families should be prepared for any scenario.
"We're telling people to plan as if the estate tax is coming back," Fleming said. "They ought to be doing the things they'd normally do: set up family partnerships and trusts. Keep gifting."
(Editing by Gary Hill)