On January 9, 2009, HR 436 was introduced in the House of Representatives.  This Bill proposes several important changes to the estate tax system.  It provides for retaining the 45% estate tax with a $3.5 million exemption starting in 2010 and it repeals carryover basis for property passing at death.  It also eliminates valuation discounts for transfers of non-business assets and severely limits minority discounts for transfers of interests in family-owned entities.    

H.R. 436 has been referred to the House Ways and Means Committee for review. The full text of the Bill is available at http://thomas.loc.gov. 

When (not if) legislation is passed changing the estate tax, it is important that you have your estate plan reviewed in light of the changes enacted.  Your Will and, if you have one, your Revocable Trust probably includes a clause intended to take advantage of the maximum estate tax exemption by way of a formula.  With the current economic downturn and depressed asset values, that formula may cause a large part (or all) of your estate to be distributed in a way you did not intend. 

It is also important to re-evaluate the balance of assets owned between you and your spouse.  Do you each have enough to take advantage of the higher exemption amount?  Asset values may have changed dramatically, throwing your plan off balance. 

You will also want to re-visit specific bequests in your estate plan, especially if your intention is to treat your descendants equally.  How have asset values changed of those specific bequests and is this still a desirable distribution plan. 

You should also consider any changes to your family’s circumstances.  If one family member has been more seriously affected, you may want to engage in some lifetime gifting.  The good news is that because asset values and interest rates are low, now is the perfect time for gifting and intra-family loans.  

Finally, if you have been considering forming a family limited partnership, now is an opportune time to do so, while discounts are still available, asset values are depressed and interest rates are low. 

Now is the perfect time to make sure that your plan is up to date with the current and forthcoming estate tax laws.  Contact our office today at 239-254-0706 to schedule an appointment with your Cox & Nici attorney to review and update your estate plan.