When President Barack Obama submitted his budget blueprint to Congress on February 26, 2009, within its 140 pages appeared the administration’s proposal for estate taxes. If approved, the budget would freeze the estate tax exemption at the current level—$3.5 million per person, with the maximum tax rate of 45%—from 2010 on. According to Blaise M. Sonnier, assistant professor, School of Accounting in the College of Business Administration, now could be a prudent time for individuals to review their estate plans and consider transferring property—including real estate, stocks, bonds, and other investments—to their heirs.

“In 2000, the first $600,000 of property owned by a person was exempt from the federal estate tax,” he said. “In 2001, the amount was increased to $675,000, and it gradually increased to its current level of $3.5 million per person, which became effective on January 1, 2009.”

Under current law, the estate tax would be completely eliminated in 2010. However, if Congress doesn’t act, the estate tax would return in 2011 with an exemption equivalent of $1 million per person.

Unlike the president’s proposal to freeze the exemption equivalent at the current level of $3.5 million, Republican-sponsored legislation would gradually increase the exemption amount until it reached $5 million in 2015. A panel of experts at a recent American Taxation Association Conference attended by Sonnier thought that the exemption amount eventually adopted would be $3.5 million per person.

Regardless of politics, today may be a good time to plan.

Given the recent decline in the value of all types of property, individuals with substantial estates may want to consult with their lawyers, CPAs, or other financial advisors about taking advantage of the $3.5 million estate tax exemption.

“Because each person’s tax and financial situation is different, planning should be done in consultation with competent legal, accounting, tax, and financial advisors,” Sonnier said.

Who might benefit from scheduling such a consultation now?

“If you believe that real estate and asset values have hit their low or near-low mark, then you could be in a position to benefit from estate planning now,” he said. “Making a gift at a time of depreciated values means that any later appreciation in value escapes taxation at your death, so you are taking action at the most efficient price for your heirs from an estate tax perspective.”

In addition to the lifetime exemption equivalent, each person can donate $13,000 per year to each of their children or grandchildren free of gift or estate tax.