The Congress Created Estate Planning Dilemma

Once again, our friends in Washington D.C., in their infinite wisdom, have created a real mess by not acting in a timely manner. Most experts felt that Congress would act before the end of 2009 to deal with the Federal Estate Tax law and expiring tax benefits, but it didn’t happen.

As a result, the Federal Estate Tax has been eliminated for one year effective January 1, 2010. The former step-up in the cost basis of assets owned by the estate to the date of death value has also been eliminated and replaced by a complicated system which starts with the decedent’s cost basis in the assets, which may be hard to determine for assets held for many years.

Although it is anticipated that Congress will retroactively change back to the old system some time later in 2010, a dilemma has been created for those of us in the estate planning business as well as some of our clients.

Many people have established estate plans with what are known as “credit shelter” trusts which provide that the surviving spouse gets the amount of the Federal Estate Tax exemption and the amount not subject to Estate Tax goes to the family trust or to the children. Particularly for individuals who might have their estates administered before the law changes, this could have the undesired result of having an individual’s estate going all to their children and completely bypassing the surviving spouse since none of the estate would be subject to Estate Tax.

Please carefully review your current estate plan and if you have any questions about this issue, please contact me.

Curtis & Curtis, P.C. is a full service law firm located in Jackson, Michigan providing superior legal services and advice to individuals, families and businesses throughout mid-Michigan since 1901.

This publication is provided for general informational purposes only and does not constitute formal legal or other professional advice. No attorney-client relationship is created with you when you read this information. The above information may be changed without notice and is not guaranteed to be complete, correct or up-to-date, and may not reflect the most current legal developments. If you have any questions or need assistance, please contact Curtis & Curtis, P.C.