Estate Planning to Cope With the Current Legislative Uncertainty

John J. Scroggin (Scroggin & Company, Roswell, Georgia) has published his article, Estate Planning to Cope With the Current Legislative Uncertainty, in the May 2007 edition of Estate Planning.

Here is the conclusion:

With the partisan wrangling that likely will continue as a result of the November 2006 election, we could be facing a confused, quickly changing landscape: 2-1/2 years of high exemptions and lower tax rates, one year of no estate tax (and generally a loss of step-up in basis), and then potential return to higher tax rates and lower exemptions.

Anyone who says he knows what transfer tax legislation will be enacted in the next four years is either clairvoyant or deranged. Unfortunately, no one has any real idea what Congress is going to do with the transfer tax rules in the next four years. Planning in this time of uncertainty is going to require great flexibility and constant review and updating. Virtually every estate plan will have to be re-examined in the net three years either to account for Congress’s failure to enact permanent transfer tax legislation or to deal with the terms of any permanent legislation that is passed.

Who benefits from this chaotic environment and the return to 2001? Seven groups will reap the greatest rewards: Roughly half the states which remain coupled to the federal estate tax will receive an unexpected revenue boost. Charities will see increased estate contributions (particularly of IRD assets) to avoid estate taxes. Fee-based planners who provide estate planning advice and estate attorneys will be inundated with work. CPAs will have more tax returns to file. The insurance industry should see substantial increases in life insurance sales to fund estate taxes. And politicians will see increased contributions to their campaigns from people on both sides of the debate. And the client/taxpayer? He’ll be paying for all of it.