Now that the presidential election is settled, there's no doubt that president-elect Obama and Congress will be addressing the fate of the federal estate tax very soon. Why? Because next year the federal estate tax exemption will increase from $2,000,000 to $3,500,000 and in 2010 the federal estate tax will completely vanish. Then, in 2011, the federal estate tax will return but the exemption will only be $1,000,000.
During his campaign, then Senator Obama was against full repeal of the federal estate tax in 2010 and instead favored making the $3,500,000 exemption permanent. But couple the fact that then Senator Obama's estate tax plan was put together well before the current economic crisis with the Democrats view that repeal of the federal estate tax would only benefit the super wealthy and take needed funds out of the federal budget, and I have to wonder if we're only a year or two away from the estate tax exemption reverting back to $1,000,000. And what about portability of the federal estate tax exemption between spouses? Forget about it, at least for now.
With this in mind, while there's been a lot talk about "Obama proofing" your investments and small business, I haven't heard anything about "Obama proofing" your estate plan. What do I mean by this? Here are a few things to consider:
- Planning for a $1,000,000 estate tax exemption;
- If you're married, taking the steps necessary to maximize the use of both spouses' estate tax exemptions through the use of AB Trusts;
- Whether you're married or single, exploring the options for minimizing your estate tax bill through gifting and advanced estate planning;
- Whether you're married or single, setting up an Irrevocable Life Insurance Trust to provide readily available cash to pay estate taxes - this needs to be done while you're younger and in good health, and the good news is that if the insurance isn't needed to pay estate taxes, then you'll be leaving a windfall of cash for your loved ones; and
- Monitoring your estate plan on a yearly or more frequent basis to insure that it still meets your needs and addresses your estate tax liability both at the state and federal levels.
- Chart Showing Federal Estate Tax Exemption: 1997 - 2011
- What is the Future of the Federal Estate Tax?
- How to Minimize Estate Taxes
- What is an AB Trust?
- What is an Irrevocable Life Insurance Trust?
- How Often Should You Review Your Estate Plan?
- Will Your Old Estate Plan Still Work Today?
Chronological Posts on Estate Tax Repeal
- July 15, 2008 - Where Do the 2008 Presidential Candidates Stand on Estate Tax Repeal?
- October 18, 2008 - Should Portability of the Estate Tax Exemption Lead to the Death of AB Trusts?
- January 13, 2009 - The End of Estate Tax Repeal
- June 2, 2009 - Predictions About the New Federal Estate Tax Law
- Sept. 17, 2009: One Year Patch Likely to End Estate Tax Repeal in 2010
- Oct. 22, 2009 - Update on Predictions About the New Federal Estate Tax Law
- Dec. 18, 2009 - Federal Estate Taxes Will Die on January 1!