Recent Developments #2

Recent Developments – Estate Planning Issues

Current Estate Tax Law

Under current law the estate tax is subject to phase-out through the year 2010. In subsequent years, however, the tax is brought back in full.  I need to repeat that because it is a little hard to believe. The estate tax ends in 2010. If you die in that year there is no estate tax. If you die in 2011 or any year after that, amounts over $1million are subject to a tax of up to 55%.  Maybe this result will be changed by Congress. But with mounting budget deficits it’s hard to foresee another tax cut.

We don’t know what will happen with the law. But, at this point, a failure to plan for the estate tax is equal to a sizeable bet on a future unpredictable event. The more money you have the bigger the bet you are making. If you bet on no tax and are wrong, your family may lose half of everything you have saved. Since we don’t know when or if Congress will act or what they will do if they act, it is prudent to take steps now to hedge against an unfavorable outcome (i.e. no change in the law). Usually in estate planning, the earlier the better since gift programs benefit from longer time periods and to the extent insurance is necessary, you may become uninsurable at some point in the future. Certainly, if prudent planning is neither expensive nor inconvenient, small or large steps should be taken to minimize or avoid this potential loss.