California Estate Planning Attorney Explains Pending Estate Tax Legislation Before Congress

Changes to several tax laws that affect estate plans are being considered in Congress this fall

. Many California estate plans may be affected by the proposed changes to the estate tax rate, a proposed exemption for production farmland, and changes to the rules for Grantor Retained Annuity Trusts.

The 2001 tax law signed by then-President Bush set the 2010 estate tax rate at 0 percent, but allowed it to revert the next year to the previous 55 percent rate that was in effect in 2000. California Estate planning attorneys have been grappling with the uncertainty of what the rate will be in the future as they created and revised estate plans post-2001. One proposal in Congress that seems to be gaining traction is to fix the estate tax rate at 45 percent for estates larger than $3.5 million per individual. This would give estate planning attorneys some certainty beyond the current gradual reduction, repeal, and reinstatement plan that was signed into law in 2001.

Another proposal would exempt production farmland included in estate plans where the heir had worked on the farm for five of the past eight years. This is viewed by its backers as a means of saving family farms from sale and development to pay tax bills. Consult your estate planning attorney if you own a working farm and have heirs who work on the farm. This legislation may significantly alter your estate planning process.

Grantor Retained Annuity Trusts (GRAT) are an estate planning tool that allows individuals to make a gift to an irrevocable trust in exchange for an annuity for a predetermined number of years. If an individual dies while the trust is in effect, the trust is taxed at a 45 percent rate. Many individuals use a rolling series of two or three-year GRAT's to remove assets from their estates, and avoid estate taxes. The Obama Administration has proposed that a 10 year minimum term be established for GRATs which reduces the utility of a GRAT in estate planning for older individuals.

If you would like more information concerning your estate planning options, consult a certified estate planning specialist who can walk you through the various options you have for your estate plan. Whether your estate planning goals are immediate or long-term, a qualified estate planning attorney will be able to counsel you on the best options available to you to meet your individual needs.

by: Kevin Von Tungeln

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