Repeal of Estate and GST Tax Provides Opportunities

December 31, 2009 , and Congress never acted as all ( including myself) expected to reinstate the Estate and Generation Skipping Transfer Taxes. The closest it came was when the House passed H.R. 4154 on December 3. The Senate read it once and placed it to be read again on December 24. The Senate won't be back in session again until January 19, 2010. It is unclear whether the Senate will take up the bill or not. Some members of the Senate apparently favor a $5 million estate tax exclusion and a top estate tax rate of 40%. Interested persons can monitor any action from the Senate Finance Committee which Democrat Max Baucus of Montana chairs.

What is also unclear as other blog commentators point out is the legality of making a tax act retroactive. Some extremely wealthy persons with large estates and no plans to die in 2010 will certainly try and take a chance.

To summarize the current status of the law and opportunities:

• No Estate Tax (period)
• Gift Tax rate of 35% (down from 45% in 2009)
• Still lifetime $1,000,000 Gift Exclusion ( rate above applies to gifts above $1,000,000)
• No Generation Skipping Transfer Tax

A Forbes Article Today sums it up well:

"Meanwhile the rich are racing to make taxable gifts. Taxable? Yep. Under the Bush tax cuts, the gift tax, which is paid on wealth of more than $1 million transferred while you're alive, did not disappear as of Jan 1. But the gift tax rate fell from 45% to 35%. Absent a political compromise, it too will rise to 55% in 2011."

Additionally, the Article mentions but doesn't do a great job of explaining the consequences of the Generation Skipping Transfer Tax being repealed ( at least for right now). What this means is that its a great year (potentially) for the wealthy to make large gifts to grandchildren. Because instead of paying an additional tax for any transfers to skip persons on top of any gift tax, there is none ( for the time being).

Some planners for extremely wealthy clients are trying to make use of the repeal of the Generation Skipping Transfer Tax in their GRAT and CLAT instruments. Usually these instruments can't have a generation skipping component because of so called ETIP ( estate tax inclusion period) rules, but if there is no GST in effect when its time for them to distribute the remainder it makes sense for them to go to Grandchildren, particularly if the Grantor's own children are already well off.

It should be an interesting year. Stay tuned for updates!

ABOUT CHRISTOPHER R. TWINING
Christopher R. Twining, Attorney at Law, based in the Westwood Neighborhood of Los Angeles is an innovative estate planning, probate & trust administration, and elder law attorney, who offers in home services for busy and movement challenged clients. The Law Office of Christopher R. Twining serves the cities of Los Angeles, Santa Monica, Culver City, Beverly Hills, West Hollywood, Pasadena, Burbank and the neighborhoods of West Los Angeles, Westwood, Brentwood, Bel-Air, Pacific Palisades, Palms, Pico-Robertson and Encino. Dedicated to helping individuals and couples prepare comprehensive estate plans according to their wishes; he offers them these services at an affordable price, in the relaxed comfort of their homes. For more information about his services, please visit http://www.twininglaw.com or call (310) 492-5990.

CHRISTOPHER R. TWINING
LAW OFFICES OF CHRISTOPHER R. TWINING
1440 VETERAN AVENUE, SUITE 509
LOS ANGELES, CALIFORNIA 90024
(310) 492-5990 Fax (310) 775 - 9774
http://www.twininglaw.com

Read more On "Repeal of Estate and GST Tax Provides Opportunities"!

Estate Plans Need Updating

Not too long ago I wrote an article indicating that for many people because of the $3.5 million dollar estate tax exclusion , that they needed to revise their estate plans.

Specifically, if you have a marital deduction aspect to your revocable living trust and it was drafted when the estate tax exclusion was far lower ( it was around $675,000 in 2001) then a surviving spouse could see themselves entirely cut out of an estate plan.

Normally one reserves a life estate in income to the surviving spouse along with a right to invade principal for Health, Education, Support and Maintenance in the BYPASS trust. If this is the case there is no great danger. However, for many people who may have children from different marriages it is possible that such a provision does not exist and your kids would take all. It really depends on the terms of the bypass trust.

The Wall Street Journal is at least bringing up the issue, even if they don't discuss it in detail.

ABOUT CHRISTOPHER R. TWINING
Christopher R. Twining, Attorney at Law, based in the Westwood Neighborhood of Los Angeles is an innovative estate planning, probate & trust administration, and elder law attorney, who offers in home services for busy and movement challenged clients. The Law Office of Christopher R. Twining serves the cities of Los Angeles, Santa Monica, Culver City, Beverly Hills, West Hollywood, Pasadena, Burbank and the neighborhoods of West Los Angeles, Westwood, Brentwood, Bel-Air, Pacific Palisades, Palms, Pico-Robertson and Encino. Dedicated to helping individuals and couples prepare comprehensive estate plans according to their wishes; he offers them these services at an affordable price, in the relaxed comfort of their homes. For more information about his services, please visit http://www.twininglaw.com or call (310) 492-5990.

CHRISTOPHER R. TWINING
LAW OFFICES OF CHRISTOPHER R. TWINING
1440 VETERAN AVENUE, SUITE 509
LOS ANGELES, CALIFORNIA 90024
(310) 492-5990 Fax (310) 775 - 9774
http://www.twininglaw.com

Read more On "Estate Plans Need Updating"!