This year marked an unusual year for the estate tax. In fact, for the first time since 1915 the country does not have a federal estate tax because the tax was removed temporarily in 2010 as part of the 2001 tax law.
But, the suspension of the tax was designed to be a temporary one, and the tax will return in 2011. What is unclear is at what level the tax will return as Congress continues to debate several proposals that could revive the tax at a rate as high as 55% for some estates. There are also varying proposals for the amount of an exemption.
In the near term, clients still have an opportunity to explore strategies to mitigate the impact of a rise in estate tax for their heirs by reviewing various documents that name beneficiaries. That’s a task that should require guidance.
For clients who will likely fall below the estate tax exemption, you may wish to discuss strategies that will simplify the transfer of assets to their heirs. In this case, you could propose a review of wills and revocable trusts. If dependent children are the beneficiaries, then the will should designate a guardian. You may also want to discuss the idea of a revocable trust, which can avoid the probate process and allow for the immediate transfer of assets.
You could also propose a review of documents for wealthier clients. But for those who may have substantial assets subject to an estate tax, you could also discuss strategies to help reduce the amount of assets subject to taxation, such as gifting strategies, irrevocable trusts, family limited partnerships, life insurance trusts, and charitable trusts.
Proposing a review of documents and estate planning strategies is an opportunity to deepen your relationship with your clients and also create or tap into partnerships with local attorneys to expand your network and the value of your service.