The Monthly Elder Law Planner

John A. Scott, P.C.

1000 S. Garfield, Suite 3, Traverse City, Michigan 49686

(231) 933-5322 Fax (231) 933-5327

April 2009

John A. Scott, P.C. – A law firm focused on estate planning, elder law, trust and probate administration, charitable foundations, and real estate. John A. Scott and Diane Kuhn Huff

ON THE LIGHTER SIDE

This column will be dedicated to funny stories, quotes, and poems. If you have a good one, fax or email it to us at ryanhunsinger@charterinternet.com so we can put it in one of our newsletters.

AT LONG LAST SENSE

By John A. Scott

Senator Max Baucus of Montana has introduced a bill (S. 722), the proposed "Taxpayer's Certainty and Relief Act of 2009", to amend the Internal Revenue Code of 1986 in some very important respects. Among those proposed changes are the following:

• Make permanent the $3.5 million exemption from the Federal Estate Tax and Generation Skipping Transfer Tax. This is the amount that is in effect for this year. Last year it was $2 million.
• Do away with the scheduled repeal of the Federal Estate and Generation Skipping Transfer Taxes which was due to be effective for the year 2010 only. In 2011 these taxes were scheduled to return with a $1 million exemptions. *
• Make the 45 % top rate permanent for Federal Estate, Gift and Generation Skipping Transfer Taxes.
• Raise the Gift tax exemption exclusion amount from $1 million to $3.5 million.
• Increase the maximum valuation reduction for family, business, real estate and farms from $750,000 to $3.5 million.
• Allow the Personal Representative of the last dying spouse to make use of the unused exemptions of prior dying spouses up to a maximum amount of $3.5 million. At last: serial marriages as an estate planning technique.
• Indexing for inflation after 2010 for all above figures.

*Sighs of relief may be in order for seniors concerned about being thrown from the train on December 31, 2010 as a "family estate planning technique".

The Tax Payers Certainty and Relief Act of 2009 is thought to have broad support in both houses of Congress and is consistent with what is thought to be the administration's position as well. This bill is also consistent with the view of what would be fair and reasonable by many estate planning professionals. The certainty provided by the bill would be a vast improvement over the nightmarish flip-flops in the tax rate in the Bush Estate Tax Reforms of 2001 which are burdened by the Byrd amendment. Hopefully the bill will pass by the requisite majority to override the Byrd amendment.

Passage of this Act will have a profound effect upon estate plans. Many couples who have engaged in estate division in order to make use of both persons' estate tax exemptions will no longer find such techniques necessary. They will be able to make use of estate planning techniques which are more consistent with societal norms for combined ownership

of property by both husbands and wives. It is also expected that for many people, estate planning techniques which the Internal Revenue Service believes to have dubious legitimacy will no longer be necessary.

If this bill passes and becomes law we will be urging that all married clients with estates of less than $7 million that have separate Trusts for tax reasons only give serious consideration to simplifying their plans by going to a joint trust.

John A. Scott 2 April 2009

Need a speaker for your group? John A. Scott and Diane Kuhn Huff are accomplished speakers on numerous estate planning and elder law issues. Call us to discuss a topic and schedule a presentation at (231) 933-5322.