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Unique Economic and Legislative Environment Presents a Rare Opportunity in Estate Planning

A unique mix of economic and legislative factors are about to converge to create a rare opportunity for those who are trying to determine the best methods for passing on their wealth to heirs.

First, two laws - the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Job and Growth Tax Relief Reconciliation Act of 2003 - are set to expire in 2010. The laws temporarily liberalize the amount of assets that can be transferred to heirs without incurring hefty estate taxes. With some planning, a married couple currently can transfer $4 million ($2 million per spouse) before running up against the estate tax. This limit moves to $7 million for a couple dying in 2009. Estates valued over the limit are taxed at a rate of 45 percent.

The estate tax is then repealed entirely for 2010 with its total return (at a $1 million exemption per person and a 55% top tax rate) in 2011 - crazy! Most experts think something will be done about this situation, but the predictions are all over the board. If the law does expire, many estate plans will have to be adjusted. Exactly what happens when the issue is addressed will also be affected by the next president and the new Congress next year. Stay tuned!

A second factor that has contributed to this unusual estate planning environment is the unique combination of a depressed stock market and low interest rates. By transferring value-depressed assets with growth potential now, families are moving assets based on the assets' current value, rather than the increased value when the economy rebounds. With an annual gift tax exclusion that limits tax free gifts to $12,000 ($24,000 for a married couple) per donee this year and $13,000 ($26,000 for a married couple) per donee next year, finding opportunities to gift while the market is low is crucial in the fight to beat the tax. With that in mind, the name of the game is to move assets now that have the potential for appreciation.

Individuals can take advantage of the current interest rate environment by loaning funds or making installment sales to heirs at a low interest rate. Intra-family loans and sales are not subject to the gift tax, if properly structured. Other techniques that take advantage of the low interest rates, be they grantor retained annuity trusts, charitable lead trusts or other similar techniques, magnify the tax savings available.

If you have questions about this issue, or any other legal topic, please contact any member of Greenebaum's Wealth Transfer Team.

Even though the content of the above Greenebaum Doll & McDonald e-bulletin is primarily informative, state and federal law obligates us to inform you that this is an advertisement. You have received this advisory because you are a client or friend of the firm.

About Greenebaum Doll & McDonald PLLC
Greenebaum Doll & McDonald PLLC is a widely-respected business law firm with approximately 200 legal professionals in six offices, serving local, national and international clients in virtually every industry. A forward-thinking business law firm, Greenebaum is committed to the practice of Breakthrough Law®.

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