The Return of the Estate Tax, Redux

In my last post I addressed the return of the estate tax. A recent Forbes article also addresses what will be an unhappy event for many. The article starts with this story:

Like many couples in their 30s, Sara and Joshua Mancell didn't even have wills before they became parents. But early this year, a few months before their son Eli's first birthday, the Minneapolis couple finally tackled this essential task. As a first priority, should the unthinkable happen, they needed to pick a guardian for Eli and a trustee to manage the money left to him. But with a net worth nearing $1.4 million, Sara, a Westinghouse engineer, and Joshua, an Ameriprise investment advisor, also had to take steps to reduce potential state and federal estate taxes that could cut into the resources left for Eli.

The federal estate tax lapsed on Jan. 1, 2010. But under current law, it will rise from the ashes on Jan. 1, 2011, and at that point--unless Congress intervenes--only $1 million per estate will be exempt from a stiff 55% tax. That compares with a $3.5 million exemption and a 45% rate in 2009.