2010 Estate Planning

As of June 8, 2010 Congress has still failed to act to advise us as to what the exact tax implications will actually be for people who die in 2010. With the repeal of the Estate Tax and Generation Skipping Transfer ("GST") tax in 2010, anyone who contemplates that they could meet their demise in 2010 would be well advised to seek legal counsel immediately to update one's estate planning documents. In particular, anyone who utilizes a "formula clause" in one's will or trust to create sub-trusts after the first spouse's death for the benefit of a surviving spouse and/or family members (i.e. a "Marital Trust" and a "Family Trust") would be well advised to update his or her documents.

For larger estates the gift tax rate this year is at an all time low of 35%. Next year, the rates revert to 55%. Should one consider making taxable gifts this year to pick up a 20% savings for the benefit of one's heirs? Anyone who has to write a check to the "U.S. Treasury" next year for 55% rates would have thought that this would have been a wonderful idea!

Clients who face end of life issues may wish to update their Health Care Powers of Attorney and Living Wills in light of the year end tax issues for 2010. The time to make these decisions is well in advance of the events that cause the need for them.

Our best guess at this time is that we are not going to see any tax legislation before the November elections. Given the current circumstances of gridlock in Washington D.C. at this time, the thought of comprehensive tax legislation getting done before year end is looking more and more unlikely. We very well may be facing a situation starting on January 1, 2011 where every unmarried citizen who dies in 2011 will be paying 55% estate taxes on one's estate in excess of $1M dollars.