Trusts & Estates

Amid Uncertainty, Estate Planners Stay Flexible

Uncertainty over the estate tax is making estate planning more difficult.

Those with estates between $1 million and $5 million are facing the biggest headaches, since their bequests may or may not be subject to estate taxes. The amount paid by their heirs will depend on the year in which they die and Congress’ future rewriting of the law, the Wall Street Journal reports (sub. req).

Some estate planners are responding with flexible strategies that allow trustees to make changes or allow heirs to disclaim part of their inheritance for the best tax benefits, according to the story. Some are simply waiting to set up trusts until the law is more certain.

Currently the amount that can be exempted from estate taxes is $2 million, but that jumps to $3.5 million in 2009. In 2010 the entire estate is exempted from tax, and then in 2011 the amount drops to $1 million. The top tax rate on estates is 45 percent in 2009 and 55 percent in 2011.

Many expect Congress to change the exempted amount to between $3.5 million and $5 million and the top rate to between 15 percent and 40 percent. But not everyone is that confident.

“Anyone who says they know what’s going to happen between now and 2011 is clairvoyant or deranged,” John Scroggin, a Roswell, Ga., lawyer, told the Wall Street Journal.

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