In 2010, for the first time since 1915, there is no federal estate tax in the US.  As of January 1, 2010, the federal estate tax and generation-skipping transfer (GST) tax were repealed.  Under current law, the repeal is scheduled to be in effect for all of 2010, although Congress may reenact the estate and GST taxes (possibly retroactive to January, 2010) at some time during the year.  Interpretation of your wills, trusts and/or other estate planning documents will be uncertain at best.

It's uncertain how the provisions of wills, trusts and other estate planning documents will be interpreted this year because many attorneys who created these documents used terminology such as "the estate tax exemption amount" and "marital deduction."  These tax concepts are not in the law this year, so there may be some question as to what your documents mean.  If a trust shows children as beneficiaries, the trust is left unchanged, and the unthinkable happens this year, a possible scenario could leave the surviving spouse with nothing while all assets are given to the children.

One solution for these issues is to take out short-term life insurance during 2010 to provide funds for the surviving spouse, pay income taxes on carryover basis property, or equalize distributions among beneficiaries.

For more information on these topics, please see your financial partner or feel free to contact Jay Lewis with IPS Advisors who alerted us to these changes.  He can be reached at jlewis@ipsadvisors.com or you can visit his website at www.ipsadvisors.com.