Newsletter - January 2010

As we start the New Year, there are a number of legal challenges that face us. Many of our clients have voiced concerens about the issues we discuss in this Newsletter.

Estate and Death Taxes

Government funding has taken a prominent role in legislative circles, with mounting federal deficits, national health care proposals, and bailouts. This is the last year of President George W. Bush's tax reforms, which will sunset at year's end, unless Congress acts soon. One of the central features of the Bush tax "reforms" was an easing of the federal estate taxes. So far, there are no estate taxes for this year, but with mounting budget pressures, this is not expected to last. Adding fuel to this fire are the public statements of Warren Buffet and Bill Gates calling for retention of the estate tax as a means to spur charitable giving among the wealthy. We believe that given these pressures, there is very little chance that the federal estate tax will be repealed. Since Texas death taxes are in essence a "surcharge" of the federal estate taxes, these will not be going away either.

Given these uncertainties, now is the time to review your estate plans. You should check your estate officers, beneficiaries, and check your net worth against your current estate plan. You should make sure that you understand what is currently being sheltered and what changes you may need to make for the future. As we all learn to adjust to the economic realities of the Great Recession, the certainty of knowing that your family is well provided for in an orderly manner is paramount, even if a more permanent "solution" awaits further Congressional action. Other elements of your estate plan, such as health and disability issues are completely independent of these tax considerations and are needs that are addressed separately and via separate forms.

The currenty Administration proposal would freeze the Unified Credit (the tax credit available to U.S. citizens against either the estate and/or gift tax) at last year's level of $3.5mm. It is unclear whether or not this amount will be indexed for inflation. We recommend caution in terms of commtting to estate tax measures that are "irrevocable" for the time being, but encourage our clients to monitor events in Washington and maintain a higher degree of flexibility in their estate planning. Levin & Atwood remains available to assist you with these needs.