What Works Today May Not Work Tomorrow, Planners Say

The new estate tax laws could do a lot of great things for individual investors' financial plans. But come 2010, when the laws are set to expire, all those strategies may need an overhaul.

'It just creates a nightmare when you try to do planning for real people,' said Bert Whitehead, a planner at Cambridge Connection in Franklin, Mich.

But help might be on the way. On July 25, Rep. Jennifer Dunn, R-Wash., introduced H.R. 2361, a bill that calls for the permanent repeal of the estate and generation-skipping transfer taxes. The bill also proposes accelerating the phase-out of the gifting tax rates by Jan. 1, 2007 instead of 2009. A spokesman for Dunn said that the bill proposes accelerated exemptions, starting at 45% in 2002 and winding down in 9% increments to zero by the beginning of 2007.

In theory, Dunn's bill would ease the confusion that has settled around the estate tax. 'It would make the tax code less of a national embarrassment,' said Michael Martin, an adviser with Financial Advantage in Columbia, Md.

Despite the advantages that a permanent repeal would bring to financial planners and their clients, advisers are pessimistic about the actual passing of H.R. 2361 right now for the same reason the new changes to the estate tax laws didn't pass the first time around -- not enough votes.

But the future is full of untold opportunities. 'Anyone can come in and be a Democrat or Republican in 2007 and change the law,' said David Hendelburg, an adviser and CPA with Jones and Kolb in Atlanta. 'There's a lot of uncertainty in the bill.'

This story was adapted from an article appearing on Financial Planning Interactive.

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