The new estate tax laws: seizing the opportunities.

• Author: Shenkman, Martin M.
• Position: TAX UPDATE - Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010

Busy season offers a great opportunity to open a dialogue with clients about changing estate tax laws and how they might be affected by them. After a period of uncertainty, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 cleared up many questions about estate tax law, at least for the immediate future. And according to attorney and author Martin M. Shenkman, the new legislation will inspire "a massive sea change in the way consumers view estate taxes." As a result, he recommends that CPAs seize the chance to communicate with clients now about what the law means to them. "Since many if not most clients will perceive that the estate tax is no longer a worry for them, practitioners should be proactive to educate clients on the many non-estate tax aspects of estate planning that have been and remain vital to address. These include succession planning, disability issues, retirement planning, state estate taxes, and so forth." Shenkman is coauthor with Steve R. Akers of the recently released Estate Planning After the Tax Relief and Job Creation Act of 2010: Tools, Tips, and Tactics, a definitive guide to the act.

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New Rules in Place

There is now a $5 million estate tax exemption and a maximum estate tax rate of 35% for anyone who dies between January 1 of this year and the end of 2012. That's a much larger exemption than the $3.5 million amount when estate taxes were last in effect in 2009, and a lower rate than the 45% in effect in 2009. Fewer estates will likely be subject to the law, in other words, and there are lower rates for those who are.

As a result, estate taxes may become less of a hot topic for clients. According to Columbia University professor Thomas A. DiPrete, Americans have a skewed, even aspirational understanding of their own wealth or potential financial situation. In fact, he notes, 19% of Americans actually think they are in the top 1% of the income distribution and 31% believe it is likely or very likely that they will someday be rich. More specifically, roughly half of those between the ages of 18 and 29 thought it was very or somewhat likely that they might ever be rich. Given these great expectations, clients' concerns about being subject to potential estate taxes may have been somewhat exaggerated.

"Now that the fear of the estate tax is gone, how will it change clients' views of what they need from...