Fed repeal unlikely -- and states are anyway ready to with their own levies. Marcia Nelson is a senior v.p. of business development at FMV Opinions, a valuation and financial advisory services firm.

Nothing, as Benjamin Franklin tells us, may be certain except for death and taxes, but estate taxes -- "death" taxes to those who hate them -- don't seem to be quite as much of a sure thing. That's mainly because the Bush administration wants rid of them.

There are of course arguments both for keeping estate taxes and for ditching them. Those who like them point to the supposed revenue windfall -- sometimes implying that assets so taxed are in some manner "ill-gotten." The anti-estate-tax squad says that they're a disincentive to hard work and frugality and -- perhaps more persuasively -- that the assets in question have already been through the tax mill.

In any case, an Internal Revenue Service survey shows that the number of people subject to estate taxation decreased by one third between 2004 and 2005. Over the past 10 years this number has dropped by over 60%. "Have Rich Stopped Dying?" the Wall Street Journal asks in the headline of an article on the IRS report. Or could the "rich" simply have figured out better ways to circumvent the estate tax system?

Congress

To answer this question, we must first look at how estate taxes are assessed -- no small feat in light of the fact that the tax provisions enacted by congress in 2001 created a moving target for assessments. One component of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 implemented a phased-in increase in the value of transferable assets at the time of death without incurring estate taxes.

In 2001, prior to EGTRRA, the exemption amount was $675,000. EGTRRA increased the exemption to $1,000,000 in 2002, $1,500,000 in 2004, $2,000,000 in 2006, and $3,500,000 in 2009. Then, in 2010, the federal estate tax disappears altogether.

Don't get too excited though. If Congress fails to make the repeal permanent, the exemption will revert back to $1,000.000 in 2011. The Bush administration has been pushing to eliminate the federal estate tax altogether, but now that the Democrats hold sway in Congress -- and given the growing deficit -- it seems probable that the estate tax is here to stay in one form or another. And though there is speculation that a new tax law will be enacted before the 2010 deadline runs out, but no one can safely predict what the exemption amount will be.

States

Meanwhile, people often overlook the estate-tax levy imposed by each state. Under EGTRRA, many states have "decoupled" from the federal system. While the estate tax exemption has increased at the federal level, some states' tax exemptions remain at pre-EGTRRA levels. So a lot of people take measures to minimize federal estate taxes only to discover they are subject to state levies. Things can get even thornier if you have property or conduct business in more than one state.

"One way to avoid -- or at least minimize -- state estate tax liability is to plan properly. Particularly when it comes to business interests or real estate holdings outside your home state, you might be able to minimize your exposure to another state's estate tax by owning those assets through a limited liability company or some other entity," says Craig Solar, an attorney at Bleakley Platt & Schmidt, a New York-based law firm.

There are many estate planning tools available, and your clients don't have to be among the super-rich to benefit from these planning opportunities. The main thing is to stay on top of estate tax laws and plan accordingly. -FWR

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