Estate Tax Repeal…Now What?

When January 1, 2010 rolled in, the federal estate tax became repealed.  Congress could not agree on a compromise so we are left with uncertainty.  Everyone should discuss their current estate plan with their advisor and make necessary revisions.  What might those revisions be?

     1.       Most estate plans minimize taxes with a formula that incorporates                the estate exemption.  This may not function effectively if there is                no estate tax.

     2.       Some estate plans dictate the exemption shall go to children or in                trust for children and the rest goes to spouse.  If there is no                exemption, some spouses could be disinherited if there is no change                to their documents.

      3.      Some estate plans tie their gift to grandchildren to the GST                exemption.  If this amount does not exist, then grandchildren could                be disinherited if there is no change to the documents.

      4.      Now there is carryover basis which replaces step-up in basis on                assets.  This is a change in the income tax treatment of assets.                 The new law directs that a decedent’s basis in assets carries over to                those who inherit the property with upward basis adjustments in                certain circumstances.  Many estate plans will need to be revised to                take advantage of these provisions.  Also, in light of the new carry                over rules for “basis”, the environment is ideal for those who have                both appreciated assets and charitable inclinations.  If you have                both, a charitable trust can be a very effective financial planning tool                as well as an estate planning tool that can reduce your income taxes                and creates a monthly stream of income for the rest of your life.  Oh,                and the best part is, it will also support your favorite charity.   

Contributed by

Mark F. Winn