Shouldn’t I Wait Until Congress…?

by Roger Ellison, CFP

[While this article is dated, it forms the base for an article which can be adapted to the current environment.]

Much political discussion in recent months has been about the Federal death tax and projections of its imminent repeal. It was a hot topic during the presidential campaign and continues today as Congress once again grapples with various proposals to reduce or eliminate various taxes.

Technically, Federal death taxes do not exist. The term “death taxes” has been a very effective marketing term used to describe federal gift and estate taxes. It is the federal gift and estate taxes (on the right to transfer assets to others) that are the real topic; other state taxes (inheritance, estate, legacy or succession taxes) are not the topic of all the public discussion.

While honorable people might differ as to whether these taxes should or should not be eliminated or reduced, and which plan is the best, that is not the discussion for this article. The discussion is about whether one should or should not wait for Congress to finalize its tax changes before writing a will.

If you do not have a will or a will substitute (a revocable living trust, for example) you should move immediately to put an estate plan in place. There is no good reason to delay more time than it takes to get to the phone and place a phone call to an attorney experienced in these matters. Don’t wait for Congress.

If you already have a will or its substitute, but you wish to make some changes, there is probably no good reason to delay making those changes. Don’t wait for Congress.

If you are concerned about paying estate taxes (and hoping that if Congress will just go ahead and act so that you won’t have to write a will), then pay particular attention to the following paragraph.

If your estate is no larger than $675,000, you should not have to pay any federal estate taxes if you die in 2001. Die in 2002 or 2003 and it’s bumped up to $700,000. In 2004 it will be $850,000; in 2005 it will be $950,000. Die in 2006 or beyond and you can pass $1,000,000 free of any estate tax. With a little bit of planning, requiring the use of an attorney, couples can double these amounts. Regardless of the size of the estate, however, everyone needs a way to determine which family, friends and charities are going to get what when a death occurs. The death is a certainty; so is the need for a plan (will). The fact that Congress may or may not change some of the rules has nothing to do with the need to have a plan in place. Don’t wait for Congress.

If your estate is large enough to where it might be subject to estate taxes, now is the ideal time to work on your estate plan. Whether Congress makes changes or not, and whether the changes are good or bad, not having a good plan in place could be an invitation for disaster. Don’t wait for Congress.

Roger Ellison, Vice President of Planned Giving, at the West Texas Rehabilitation Center Foundation, is a Certified Financial Planner who provides gift and estate planning services on a no cost, no obligation basis. He may be reached at 325-223-6309 or roger@rogerellison.com