Filed Under:Life Insurance, Life Planning Strategies

Down to the wire: Four estate planning tips

What will happen with estate tax policy? It's all guesswork, which means estate planners must account for a range of outcomes. "It's really important to build as much flexibility into your [estate] plan as possible," says Massachusetts estate planning attorney Brian J. DesRosiers. Experts recommend considering the following tactics to move forward amid the uncertainty.

Use 'if ... then' planning tactics. The estate planning community is keeping tabs on the estate tax policy debate on Capitol Hill. A plan enacted today must have the flexibility to be revised if the outcome of the policy debate in Washington so dictates.

Buy convertible-term life insurance. The prudent move today in many cases is to buy a term life policy that can straightforwardly be converted to a permanent policy once it's clear what tax parameters will be.

David Schlossberg, estate and financial planning advisor in East Dundee, Ill., says, "Really, it's a short-term Band-Aid that can be replaced with a longer-term solution if necessary."

Beware changing basis and step-up rules. Confusing matters further are step-up rules that apply only this year in computing the tax liability associated with assets transferred in an estate. While there's no step-up to date-of-death value for assets owned by people dying in 2010, there is a $1.3 million exemption from gains, plus a $3 million exemption on assets inherited from a spouse. But those parameters are currently due to give way in 2011 to more familiar step-up provisions. All this should weigh heavily in deciding on a type of trust and how to configure it, DesRosiers says.

"A client's heirs could end up getting slammed if they inherit low-basis assets in 2010," DesRosiers says.

Get more generous with gifting.

"If the client has highly appreciated assets, it might be worth transferring those now," Schlossberg says.

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Nichole Morford

Nichole Morford
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