Reflecting On the Future - Succession Planning and Constant Changes in Federal Tax Law

What will the future bring after the last year or so of frenetic estate and business succession planning? I don’t have any better crystal ball today than I had last year when I was advising clients to play “use it or lose it” with their gift and generation skipping tax credits. However one thing is for sure, estate and gift tax rates have increased to 40%. That means more liquidity will be required to transfer business interest to the next generation. After adding the State inheritance taxes most taxable estates will be taxed at 50% or more. A 50%+ transfer tax would lead me to believe that there will be no significant let up in estate planning.  We have already seen a spurt in activity from those who intended to do something yet did not get around to it and now feel as though they have been given a reprieve from the curse of procrastination by the continuation of the estate tax credits. On a related note, I would anticipate seeing a campaign by the IRS estate auditor to challenge discounting. There may have been some hasty valuations prepared last year, and I have no doubt that if after a few test audits they find a trend, the IRS will recognize low-hanging fruit and begin auditing 2012 gifts with vigor. To read the end of this article, click here.