The Estate Tax Planning Dilemma | Finance information

The failure of Congress to pass legislation to resolve the estate tax issue has put estate planning professionals and their clients in a tenuous position.

In 2001, Congress passed and President Bush signed a law that raised Gradually the estate tax exemption from $ 600,000 to $ 3.5 million in 2009. (Million $ 1) The law further provided a one year repeal of this tax in 2010 with its scheduled return in 2011 at a higher rate and with a lower exemption amount. Most anticipated that Congress would pass legislation Extending the 2009 status or even permanently Eliminating the estate tax.

Despite a period of 8 years to act, Congress has failed to do anything to stabilize the situation. Apparently, the Republican controlled legislature of the first six months of this period, despite bold talk of repeal permanently lost, its nerve. And today?s Congress, Which many have collectively diagnosed with a severe case of ADHD, is too busy with health care, cap and trade, executive compensation and other issues to give this issue much thought.

This leaves estate planners in quite a dilemma with respect to advising their clients. The current situation calls for major revisions in many estate plans, with more changes to come Depending on how Congress acts, if it acts at all This is sure to keep us busy estate planning professionals, but it creates excess expense and uncertainty for our clients .

There is rampant speculation as to what Congress will do, ranging from doing nothing (and Allowing the current law to remain) Extending to the 2009 provisions indefinitely to permanently Repealing the estate tax. There is also The Possibility of reinstating the estate tax retroactively in 2010 as proposed by Senate Finance Committee Chairman, Max Baucus. This load will surely invite legal challenges Possibility to its constitutionality.

From an estate planning perspective, even the temporary repeal of the estate tax can have severe unintended consequences. Married couples with significant estates have set up estate plans containing provisions creating ?Credit Shelter Trust? which allow them to maximize their estate tax exemptions. When the first spouse so, assets with a value equal to the current exemption amount are put into the Credit Shelter Trust that spouse?s exemption preserving THEREBY. The remainder of his estate passes to the surviving spouse free of estate taxes due to the unlimited marital deduction. The Transferred assets to the Credit Shelter Trust are included in the deceased spouse?s estate for federal estate tax purposes. As a result the surviving spouse is given limited access to assets examined. The language of wills and trusts provides the most amount passing to the Credit Shelter Trust will be equal to the current federal estate tax exemption. Since the entire estate will be exempt from federal estate tax, one interpretation of the trust language may require all assets to be placed in the Credit Shelter Trust Malthus leaving the surviving spouse with no assets from the deceased spouse?s estate. Another interpretation may result in no assets being Transferred into the Credit Shelter Trust. In this case all assets will pass to the surviving spouse. If the estate tax returns in 2011 with a $ 1 million exemption, then the deceased spouse?s exemption will not have been preserved leading to additional $ 550,000 in estate taxes. Of course, the taxpayer can have his or her estate planning attorney revise his or her documents to meet this scenario. So a person dying in 2010, can take full advantage of the temporary repeal ? unless, of course, Congress changes the law retroactively

And our clients already complain that their documents are too complicated and full of legaleze <.. p="" readability="0.912556053812"> id=?article-resource?> Hanewinckel Dean is an attorney practicing estate planning in Southwest Florida. He is the author of THE OFFICIAL SNOWBIRD?S GUIDE TO BECOMING A FLORIDA RESIDENT, the most complete guide for moving to Florida, available at Amazon.com. Dean also writes a blog about creating a legacy for your family and your community. Please check it out at http://www.manifestyourlegacy.com .

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