Appeal of Estate Tax Repeal Is No Reason to Skip Estate Planning

Presently, a taxpayer can claim $2 million in federal estate tax exemptions. The exemption amount is slated to increase to $3.5 million in 2009 and estate taxes will vanish completely in 2010. Great. But wait – if Congress does not vote to extend the repeal, in 2011 estate taxes will be re-instated with an exemption allowance of $1 million. Similarly, the estate tax rate is currently 46% and is scheduled to decrease to 45% in 2007. Once again, if Congress does not take action, the rate will increase to 55% in 2011.

This game of exemption and tax rate musical chairs has caused some people to avoid or delay developing an estate plan. Although managing estate taxes is certainly a valid reason for creating an estate plan, there are also other equally compelling reasons such as:

Providing for your family. An estate plan can assist in ensuring your family is financially secure in the case of your death or incapacity.
Avoiding additional emotional trauma. The death or incapacitation of a loved one causes enough stress on family members without having the added burden of trying to determine (and agree about) what you would have wanted. Many times fighting over who gets what is made worse when compounded with grief.
Allowing you to be in control. An estate plan not only allows you to dictate who gets what, but you also have the power to say when and under what circumstances assets are distributed.
Protecting Assets. You have the opportunity to leave assets to your children in a way that is protected from potential future lawsuits against them, divorces, and estate taxes when your children ultimately pass away.

Bear in mind the scheduled repeal is only temporary unless Congress acts to extend it, so don't let the appeal of repeal lull you into delaying or avoiding creation of your estate plan.

Source: MetroWest Daily News, 4-7-06
& Mark W. Worthington

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