This summer, Congress passed a tax relief bill that proposes to give Americans $792 billion of tax savings. This bill includes elimination of the estate tax. Before you start jumping up and down on the sofa, remember that a bill is not law and President Clinton has said he will veto the bill. And if you analyze how the votes tallied in Congress along party lines, you can see that Congress will not have the needed majority to overturn Clinton 's veto. So don't plan on the estate tax disappearing.
In fact, if we have a democratic administration after the next election, you might see estate taxes increase! For politicians, estate taxes are the easiest taxes to increase because they are collected from dead people! This is a voting block that doesn't complain much and certainly does not affect the outcome at the polls. Additionally, less than 4% of the US households have a net worth large enough to pay estate taxes (US Census Bureau, 1993). So there are very few people to raise objections to increases in the estate tax.
The bottom line is this--if you have an estate over $650,000, then you need to be concerned about estate taxes. In fact, we advise people to use as much of their $650,000 exemption as they can right now. Once you have used this tax break by removing assets from your estate, even if the estate tax is reduced later, Congress cannot come back and take away the assets you have legitimately segregated and protected from taxes.
It's simple to remove assets from your estate. You can simply place them in a trust (not a living trust as this is still part of your estate subject to tax). If you later need to use those assets, you could still have the flexibility to access those funds. But the beauty of using your exemption as early as possible is that you avoid $240,000 of taxes if Congress ever decides to remove the exemption altogether.
If you have not done an estate plan or are confused about what you should do, you can order a free article on the basic of estate planning or check off on the enclosed coupon to set a free appointment.