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A. Overview.

A. Overview.

These are motivated by a desire to pass more wealth to survivors, by saving federal estate tax, while retaining the maximum control permitted by law. They are generally not used for those whose estate (combined marital estate, if married) is expected to be under $1.5 million, since there will be no federal estate tax anyway. Under the 2001 Tax Relief Act, this $1 million figure will rise to $3.5 million over the next few years. Then, the federal estate tax is set for complete elimination in 2010, but the entire 2001 tax law automatically expires only a year later, in 2011. So, if no further legislation is enacted, we would be back to the law as it existed before the 2001 Tax Relief Act. That law provided for the estate tax to continue, with the threshold to reach a maximum of only $1 million.

There remains strong opposition to the total repeal of the estate tax. Additionally, if the rosy economic forecasts that encouraged the tax cut don’t come true, there will be additional pressure on lawmakers to “un-repeal” the estate tax well before its scheduled end in 2010. The situation is, therefore, as confusing and uncertain as could be, and folks would be wise to stay in touch with their advisors in the years ahead.

Meanwhile, it is probably safer to plan on the estate tax surviving in some form. At least know where you stand – don’t underestimate the future value of your estate! This is a very common mistake. Often, people “forget” assets such as life insurance policies and retirement accounts, both of which are included – with everything else you own.

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