Additional Comments on the Estate Tax Repeal

One of the common estate planning strategies, to minimize federal estate tax, was to set up a trust (either in a living trust or a will) to shelter the estate equivalent of the Federal Estate Tax Credit which, in 2009, was $3.5 million.

Depending upon the size of the estate, there were essentially two models: One would essentially maximize the federal estate exemption by leaving an amount in that trust that would minimize the size of the surviving spouses estate on his or her death. The other form would transfer everything to the surviving spouse except for an amount in excess of the estate equivalent of the Federal Estate Tax Credit.

With the current non-existence of the Federal Estate Tax law, married couples may either have their wills or trusts drafted to appropriate account for all contingencies. However, the challenge in 2010 is knowing whether Congress, at some point up to 31 December 2010, will draft a law reinstating the Federal Estate Tax retroactive to 1 January 2010.

Individuals whose asset portfolios exceed $1,000,000.00 would be well advised in 2010 to update their estate planning to address the best of all worlds.

One point that should be made that is probably being missed in the current reporting. In all of these scenarios the deceased spouse's trust should have a provision that allows the assets of the exemption equivalent trust to be used for the health, support and maintenance of the surviving spouse. So, if the drafting has essentially transferred all of the deceased spouse's assets into this trust, the surviving spouse should not think that she will be left destitute.

Under any circumstances, 2010 is the year to update your estate planning to address an estate tax scenario that is expected at some time this year to drastically change.