Estate Tax Planning And Marketing Oppor-tunities Of The Economic Growth And Tax Relief Reconciliation Act Of 2001

Abstract

The best advice tax practitioners can give clients after the 2001 Tax Relief Act, is that the optimal time to die in the next decade will be 2010!  What has been touted as a repeal of the Federal estate tax, has actually resulted in increasing the importance of estate tax planning.   This is due to several factors.  First, the rate reduction is phased in so slowly that in 2009, the top estate rate will still be 45% and the exemption amount only $3.5 million.  In 2010, repeal is actually achieved, but for one year only.  The “repeal” sunsets in 2011 when the estate tax comes back in full, using a maximum 55% rate and a $1 million exemption.   Basis of inherited property may prove to be a nightmare.  Some property will get a stepped up basis, other property will not.  Further complicating the picture is that the gift tax has not been repealed. 

The estate tax planner will be faced with a host of issues to consider.  Which estate planning strategies are still valid?  What new planning tools will be developed?  Many wills will include obsolete provisions and will need to be redrafted.  Health of the client will become more important in the planning process.  Marketing issues of planning under such uncertainty abound.  This paper examines the new estate and gift tax provisions; offers strategies for navigating the sea of complexity and uncertainty; and explores the marketing opportunities for financial planners created by the new law.