ESTATE TAX REPEAL IS NOT
ESTATE PLANNING REPEAL

On June 7, 2001, President Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001. This Act contains significant provisions pertaining to estate taxation. Interestingly, while the estate tax exemption levels, (the amount a decedent can leave "estate tax free") will increase, the law only repeals the estate tax for persons dying specifically in the year 2010. Gift tax has not been repealed, although the amount that can be "gifted" without gift tax consequence rises to one million dollars in the year 2002. Finally, while estates of those dying in the year 2010 will not be subject to estate tax, the "step-up" in basis currently received by beneficiaries will, as a practical matter, be abolished. Ironically, with proper planning, a married couple is "best off" estate tax wise, passing away and leaving their estates in the year 2009; the following year, absent substantial planning, their heirs, even with the "repeal" of the estate tax will be worse off.

While the foregoing is merely a brief summary of highlights concerning the estate tax ramifications of the new law, it is actually more important to remember that Estate Planning has never been solely concerned with tax matters, nor will it be in the future. Estate Planning, irrespective of the current tax laws, or new tax laws yet to come, is a requirement for all of us, no matter the sizes of our estates.

As I have discussed in this column in the past, estate planning is the responsibility of each of us to provide for the orderly transition of our assets, not only at our death, but also in the event of significant incapacity. Taxation or lack of taxation has little to do with being sure that significant sums of money are not necessarily handed our immediately to an heir on their 18th birthday; taxation has little to do with protecting one's spouse in a "second marriage" and at the same time providing ultimate security for children from a prior marriage. The list goes on and on.

Most importantly, please remember that the supposed "repeal" of the estate tax only changes certain tax planning techniques, it no way alleviates the need for proper estate planning!