BENSON, PANTELLO, MORRIS, JAMES & LOGAN 3505 LAKE AVE FORT WAYNE, IN 46805 260-424-7077 Personal Attention For Your Legal Needs

Tax and Estate Planning The Estate and Gift Tax is Likely to Be Cut This Year Reported by Ron James       Hold on to your estate plan but get ready for changes. There appears to be wide support on both sides of the aisle for cutting the Estate and Gift Tax this year. Three possible scenarios are in the running. These include: A gradual phase-out over a number of years; An immediate increase in the credit, with retention of the tax on larger estates; or, An immediate repeal of the tax, but a repeal of the automatic step-up in basis at death.       The first is the proposal favored by the Bush administration. The second is the leading Democratic proposal. The third is favored by many "simple" tax scheme supporters. Unfortunately, this "simple" plan would not be simple when it comes to record keeping (as anyone who has tried to keep track of their own basis, let alone a basis passed on to you by another, will tell you).       Currently, the estate tax credit will rise each year through 2006 until the tax exclusion amount will allow the tax-free transfer of $1 million (on top of the $10,000 per year per donee tax-free gift provision). Since Congress appears to be focusing on short-term relief, whatever change is made will probably be "frontloaded" as much as possible. Thus, the most likely change will be to advance the slow phase-in so that the 2006 exclusion amount is reached quickly, possibly as soon as next year, with restrictions on basis step-up now but possibly phased out starting later this decade. If, as another possibility, the Estate Tax is repealed totally, currently existing plans which provide for maximum tax-free transfers utilizing the spouse "by-pass" principal will need to be immediately changed to avoid the complete exclusion of the spouse from estate benefit. Of course, while Congress is in session my crystal ball always seems to get a little cloudy...       Regardless of which plan or combination is ultimately adopted, it is likely that you will still need estate planning for at least the short term - until the passing of the period of uncertainty which follows any tax change. Even after that, creditor protection and taking care of minor children will remain as worthwhile goals of estate planning.