Now that Congress Has Repealed the Estate Tax…!

by Roger Ellison, CFP

[Notice that some of this information is out-of-date.]

For the better part of the last couple of years, public discussion has frequently focused on the repeal of  the estate or “death” tax. Now that Congress has finally passed such a law and the President has signed it, two topics begin to emerge: 1) What did Congress do? and 2) What should I do now?

What did Congress do?

The Economic Growth and Tax Relief Reconciliation Act of 2001 (H.R. 1836) does a lot of things by way of tax reduction, some of which are immediate and some of which are phased in or out over the next ten years. Generally, income tax rates will go down, tax benefits and incentives will increase and estate taxes will disappear over the next decade. Many will get an immediate income tax “rebate” between $300 and $600 sometime this summer (2001).

The devil, of course, is in the details and many of these changes are gradual, some last for only a few years, and some may not appear to be all they seem at first glance. Because this law is spread out over such a long period of time,  and because it is a part of the political process, we should expect that additional changes will take place in the interim. Notice also that this law will “sunset” December 31, 2010, raising the possibility that the full repeal of the estate tax by 2010 will be cancelled by 2011!  How frustrating and confusing could that be for planning your estate?

What should I do now?

Enjoy the benefits while they last. Expect that over the next few years, taxes are likely to decrease. If you have a large taxable estate, live until 2010, but perhaps not beyond 2011! Expect change.

Many important things need to be done, regardless of what happens to estate taxes:

1. Make sure your beneficiary designations and payment options are properly done,
2. Make sure you have a current Directive to Physicians stating your directions for life prolonging medical procedures,
3. Make sure you have a current Durable Power of Attorney for Health Care so that someone can make health care decisions for you if you are unable to do so yourself,
4. Make sure you have a current Durable Power of Attorney (for all matters other than health care) so that someone can make “business” decisions if you are unable to do so yourself,
5. Make sure that you have an up-to-date will or revocable living trust,
6. Make sure you have provided in the wisest way you can for yourself, your family and loved ones, and
7. Consider including one or more of your favorite charities in your will as a testimony to the values that have guided your life.
8. All that done, if your estate is large, get some very competent professional advice.

Roger Ellison, Vice President for 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