Here is some food for thought: If Congress doesn’t pass a permanent federal estate tax fix soon, we are looking at perhaps 2010 staying at the $3.5 Million exemption, as it is more likely that they’ll pass a one year fix. That’s already passed the House and I think the Senate will probably pass it too. But I get the feeling we’re going to be back to a $1 Million exemption in 2011, because quite simply, the federal government needs revenue. They cannot sustain a $12 Trillion and growing deficit by lowering or eliminating taxes.
What does this mean for you? If you are worth at least $.5 Million or more, you must seriously consider trust-based planning. Proper planning with trusts, particularly for married couples, can reduce and (sometimes permanently) delay estate taxes, depending on how the trust is designed.
The key takeaway is that trust-based planning is something you ought to be considering now, even if you don’t consider your estate to be valuable. Depending on your estate, your $.5 Million could easily grow during your lifetime and pass the taxable threshold. You should know that living trusts are not away to avoid income taxes or estate taxes. But, with proper planning, it is possible that we can make sure you don’t pay more estate taxes than you have to, and we can use sophisticated tools to delay the payment of those taxes. The bottom line is, these are times of uncertainty. A will-based plan for any estate cannot account for the uncertainty as well as a proper trust-based plan can.