Just two days ago, Barack Obama was re-elected as President.  In addition, the Republican Party retained control of the House of Representatives, while the Democratic Party retained control of the Senate.

What does this mean for future tax policy, and transfer tax policy (e.g., estate and gift tax policy) in particular?  Well, the short answer is that it is probably still too soon to tell, and we may not even have a definitive answer until the end of 2013.

What we do know is that current law calls for a return as of January 1, 2013, to 2001 levels of (i) $1.0 million gift and estate tax exemption amounts per person, (ii) a projected $1.39 million generation-skipping transfer (“GST”) tax exemption amount per person (this figure is subject to an inflation adjustment), and (iii) a top rate for all three taxes of 55%.  (Click here for a description of the current law’s impact on income taxes.)

However, many commentators and practitioners believe that there will be some tax law change to prevent this return to 2001 levels.  Thus, reviewing President Obama’s stated position on this issue could be instructive.

Earlier this year in February, the Treasury Department released its General Explanations of the Administration’s Fiscal Year 2013 Revenue Proposals (the “Green Book”).  The 2013 Green Book includes a proposal to return the estate, GST and gift tax exemption amounts and tax rates to 2009 levels:  (i) a $3.5 million exemption amount for estate and GST taxes, (ii) a $1.0 million exemption amount for gift taxes, and (iii) a top rate for all three taxes of 45%.  (It also includes proposals to modify the valuation discount rules and to require a minimum term for grantor retained annuity trusts (“GRATs”).  However, those two issues were also identified in the 2011 Green Book released in February 2010, and the current tax law passed in December 2010 did not include these proposals.)

Of course, any tax law change also requires agreement from both houses of Congress.  Since Congress remains divided, some compromise across party lines will likely be required.  Therefore, one should consider the position of the Republican Party, as well.

As his party’s Presidential candidate, Governor Romney’s stated position was straightforward:  eliminate the estate tax.  Presumably, he would have similarly eliminated the gift and GST taxes.  (Indeed, 2012 bills introduced by Republican Senator John Boozman and Republican Representative Tim Griffin both eliminate all three taxes.)

It therefore may be reasonable to expect any new tax law to reflect some compromise between those two positions.  (For example, the 2010 tax law introduced higher exemption amounts than the Democratic Party initially favored – a result of compromise with the Republican Party.)

Unfortunately, it is also possible that nothing could be decided until the end of 2013 (though a change in income tax law could come sooner).  Indeed, one need only look back two years to 2010 for an example of an estate, GST and gift tax law passing on December 17, 2010, but applying retroactively to January 1, 2010.  Thus, a new estate, GST and gift tax law may not be enacted until the end of 2013, to apply retroactively to January 1, 2013.

We will all just have to stay tuned.