As a follow-up to yesterday’s blog post, the House of Representatives passed a package extending the Bush-era tax cuts for two more years and substantially revising the estate tax.

Writing for the Non Profit Times, Mark Hrywna reports that had Congress not acted, the estate tax would have returned to its 2001 rates beginning January 1, 2011–$1 million exemption amount with a flat tax of 55% for all amounts in excess of $1 million.

But now that Congress has passed President Obama’s negotiated package, the estate tax, for at least the next two years, is as follows: a $5 million exemption amount per individual (or $10 million per married couple), with a flat tax of 35% for all amounts in excess of $5 million for individuals (or $10 million for married couples).

For example, an individual dying in 2011 with a net estate of $6 million can pass $5 million tax-free to his/her heirs and beneficiaries. The remaining $1 million would be taxed at a flat rate of 35% or $350,000.

Married couples are allowed to combine the $5 million exemption (with the proper estate planning) allowing them to transfer $10 million tax-free to their heirs and beneficiaries. Thus, if a married couple both pass away in 2011, and their net estate is worth $12 million, then $10 million would pass tax-free to their heirs and beneficiaries. The remaining $2 million would be taxed at a flat rate of 35% or $700,000.

Much of this analysis is academic as Janet Novack, writing for Forbes, points out that fewer than 4,000 families will pay estate tax next year. But, Ms. Novack goes on to point out that individuals and couples who are not affected by the estate tax should still complete an estate plan. You can read Ms. Novack’s full article here.