Continued Uncertainty in the Estate Tax Law Calls for Creative Planning

While many were hoping that the estate tax was facing its final days, it is becoming evident that it is likely to survive. The question remains, however, as to what shape it will take several years from now. Some of the areas of uncertainty include the amount of exemption and the tax rate applicable to the non-exempt estate. The current federal exemption is two million dollars per person. It is supposed to rise to $3.5 million, disappear in 2009, and then reappear as low as one million dollars in 2011.

The continuing flux in the federal tax exemption area mostly affects individuals whose estates are worth between one and five million dollars. To deal with the uncertainty of the future, these individuals have often been advised to utilize the following techniques:

• Disclaimers
• Allowing heirs flexibility in decision-making
• Giving money to family members during testator’s lifetime
• Grantor-retained annuity trust (GRAT)

See Rachel Emma Silverman, Families Rethink Their Estate Plans, Wall St. J., Oct. 10, 2007, at D1.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.