Practical Estate Planning Guidelines: Navigating Through New Trust and Tax Laws

Temple, Diana Hastings
April 2005
Journal of Financial Planning;Apr2005, Vol. 18 Issue 4, p56
Academic Journal
• The Economic Growth and Tax Relief Reconciliation Act of 2001 introduced new uncertainty into gift and estate planning. This article addresses numerous client estate situations and what steps might be taken in light of this uncertainty. • The possible permanent repeal of the estate tax bas reduced the desirability of making taxable gifts in the next few years. But taxable gifting remains viable in some situations. Gambling on estate tax repeal is a risky strategy. • Clients who want to make gifts should make use of the annual exclusion and the education/medical gift exclusion. Clients over age 80 should consider taxable gifts to remove gift-tax dollars from the estate. • Clients with real or significant tangible personal property in states that have "decoupled" their estate tax from the "pick-up" tax method should consider gifting. • Clients who have already paid gift taxes but wish to make more gifts need to use their "individually calculated" increase in their "applicable credit" amount. They may find it advantageous to wait to gift in order to take advantage of decreasing gift-tax rates. • On the estate-tax side, clients need to beware of outright bequests that might waste applicable credit amounts. • For estates valued up to $3 million, disclaimer bypass options for spouses may be preferable, but may cause problems In the case of nonspouse beneficiaries. • An Independent trustee with broad dispositive powers, and a durable power of attorney with powers to accommodate changing laws and tax situations, may be necessary in order to provide flexibility. INSET: Executive Summary.


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