With continuing demands on the Federal budget for the war in Iraq, hurricane relief, health care and Social Security, the prospects for permanent repeal of the Federal estate tax have receded.

Under current law, the Federal estate tax exclusion amount is $2 million, and will increase to $3.5 million in 2009. The maximum estate tax bracket is now 45%. In 2010 is the year of no tax, regardless of the amount of money one has at death. In 2011 the sunset provisions of the law take effect and the exemption reverts back to the $1 million threshold. The House, Senate, and the President indicate that they want to increase the exemption to some greater sum, but it is unclear whether this will be effective in 2011, or whether the new schedule of exemptions will become effective immediately.

Due to the migration of wealthy individuals to Florida, more Federal estate tax returns are now filed in Florida than in New York. Because of the difficulty in predicting tax law changes, high net worth clients should anticipate the need for review and probably revision of their estate plans in the next five years.

In any event, it is important to consider making use of these exemptions if one has significant assets. The tax could be eliminated if both spouses create separate trusts. This would leave the funds in trust for the benefit of the surviving spouse and children. The surviving spouse will not have an unfettered right to control the decedent spouse's assets, but they will be available if necessary. With some planning, significant sums of money may be passed on to the next generation without estate tax. There have been many changes in estate tax law and regulations in the last few years. It is critical to keep current. Please contact us or come in for a review of your estate planning, we would be more than happy to go over your estate planning with you.