This decision – heck, any decision – has been much anticipated so that people could do their end-of-the-year planning.  The good news is that it also comes with some direction about the estate tax so we can all move forward with estate tax planning as well.

What should you do?

You have probably been talking to your accountant about this contingency, and now you need to act.  If this means shifting income from this year to next, taking more expenses this year, converting an IRA to a Roth, etc., you now need to make all that happen before the end of the year.   (As if you didn’t have enough to do already.)

(And, am I the only one feeling that there was way too much excitement last week?  The Giants won the World Series, the election, the fall back to Standard Time, and then I had my client appreciation event all day yesterday.  That’s a lot of life in one week.)

And so now what?

This might be one of the most interesting lame-duck sessions we’ve ever seen in Congress.  The two big ones I have my eye on are whether the Bush tax cuts will be extended and whether Congress is going to do something about the estate tax for 2011 and beyond.  Many of us stand to be impacted dramatically by those decisions. I can’t remember the last time I saw so many of my CPA and estate planning lawyers paying so much attention to Congress.  Decisions made at the last hour of this year might allow for little planning and maneuvering before year-end, so it seems much planning is being done in anticipation of one move or another.  Make sure you are in touch with these professionals in your life, especially if you are self-employed, have a family income in excess of $200K, are 70-and-a-half or older, or have a net worth in excess of $750K.

What will this mean?  Most likely, nothing. Congress has been way too busy with healthcare to deal with this issue, especially since the tax generates relatively little revenue. But this issue is a mess for the estate planning of those high net worth folks who tend to contribute to political campaigns and issues.  While the estate tax goes away, the carry-over basis rules step in.  Congress has tried that before. It doesn’t work.  In the spring, Congress will likely reinstate the estate tax to 2010 levels and make it retroactive to January 1, 2010.  We’ll have to see where Congress goes from there.

What should you do?  Bay Area residents will likely have a net worth of over $1 million when they die, so you need to pay attention to what happens and be in contact with your estate planning attorney.  Those folks with parents on life support with estates greater than $5 million might have some opportunities here, but for most of us, no need to kill off those aging relatives next year and no need to panic about your estate plan.