• 11
  • February
    2011

There is something that everyone who is putting their affairs in order and doing estate planning needs to be aware of: the plan needs to be flexible enough to account for changes in federal tax laws. The compromise reached at the end of 2010 gave some certainty back to taxpayers, but then again, the new law lasts only two years. That's not very helpful for long-range estate planning.

The result is that everyone has to plan for the next two years based on what is known about the law, and then plan for 2013 and beyond based on what the law may become. In the best case scenario, people would revise their plans once the unknowns become known. Realistically, though, many people will not do that, and some may not be able to.

Some advisers (such as Joseph Septimus in a recent New York Times article) are saying people with less than $10 million need to refocus their estate plans, moving from tax avoidance toward flexible plans for the distribution, protection and management of their assets that will be effective regardless of the future shape of tax laws.

One example is the new $5 million-per-person exemption from the federal estate tax. Congress raised this amount that can be passed tax-free to heirs before death to $5 million from $1 million. It is unlikely that a future Congress would lower the $5 million exemption, but it would not be a good idea to have a plan that counted on that exemption amount absolutely.

Florida estate planning attorneys advise people to seek professional help with developing their estate plans, because of the combination of complexity and uncertainty involved. Even simple matters like the $5 million exemption have many different results based on innumerable factors and plans. 

Source: New York Times "Certainty on Tax, but Just for Two Years" 2/10/2011