Elaine Gagliardi on Uncertain Times: Anticipating Change and Reacting to Recent Wealth Transfer Tax Developments

Looming on the horizon is the very real possibility of estate tax repeal. In the interim for those clients needing to immediately make estate planning decisions, the question becomes what planning strategies best meet client needs in the face of an uncertain estate tax. Acknowledging that the ultimate answer depends on individual circumstances and goals, some common planning strategies nevertheless emerge as better options than others to address particular client goals, especially those of married couples. These planning strategies work well now and can be adapted to work well under the most likely Congressional response to repeal. Republicans have alluded to the possibility of repeal with no change to an estate’s ability to take a stepped-up basis for property with built-in gain, of repeal with a carry-over basis for such property at death, and of imposing a Canadian-style capital gains tax at death. Analysis of each of these impending scenarios point to similar strategies as optimal in light of common client goals. This article begins by assessing the likelihood of permanent estate tax repeal and, if repeal occurs, the possible replacement tax regimes on the table. Next, in light of likely replacement tax regimes, it analyzes the estate planning options that best meet client needs regardless of which replacement regime Congress might enact. The article specifically addresses the questions of: (1) whether clients should proceed with lifetime transfers currently; (2) how best to make the marital gift; and (3) whether the married decedent’s estate should make the portability election. A continually shifting estate and gift tax landscape and the certainty of evolving family needs has encouraged state law enactment of legislation and development of techniques to respond to persistent change. These techniques also prove useful in the face of estate tax repeal