Learn more about Private Clients, Trusts and Estates at Schiff Hardin. For more information, contact one of the following attorneys: Chicago Thomas W. Abendroth Jeffrey M. Bergman David C. Blickenstaff Harmon A. Brown David R. Hodgman Michael J. Huft Kim Kamin Theresa M.H. Marx David A. Milberg Robert R. Pluth Jr. Christine R.W. Quigley Debra L. Stetter Thomas R. Wechter Lake Forest Katherine J. Levy New York Paul J. Collins John D. Dadakis Richard A. Siegal San Francisco Michael Burnstein Richard J. Guggenhime Schiff Hardin Offices One Atlantic Center, Suite 2300 1201 West Peachtree Atlanta, GA 30309 225 Franklin Street, Suite 2600  Boston, MA 02110  233 S Wacker Drive Suite 6600 Chicago, IL 60606 One Westminster Place Suite 200 Lake Forest, IL 60045 900 Third Avenue New York, NY 10022 One Market Spear Street Tower 32nd Floor San Francisco, CA 94105 1666 K Street, NW Suite 300 Washington, DC 20006 - - - - - - - - - Join our mailing list. Forward this alert to a friend or colleague. - - - - - - - - -

Estate Tax Repeal?

In our December 2009 Client Alert we reported the deadlock in Congress that now has resulted in the estate tax being repealed for people who die in the year 2010. While many observers still expect Congress to retroactively reinstate the estate tax and other related tax rules, the deadlock continues.

Alarmist Media Warnings

It is impossible to predict when or how Congress will act. The media is full of warnings, in our view unnecessarily alarmist, that everyone must immediately change their estate plans. In part because of the flexible provisions we historically have included in our clients' estate plans, we continue to be comfortable that, for the majority, no changes are necessary yet. For most of our clients, taking a wait-and-see approach is the best (and least costly) response to the current uncertainty.

For A Few, Warnings Are Appropriate

Unfortunately, however, for a minority of clients, if death occurs in 2010, the estate plan might not work as intended. Estate allocations could be distorted so that a spouse or child is unintentionally disinherited. Or, assets with low tax basis might not qualify for basis increases that the new rules allow. The only way to be certain you are not in that minority is to ask us to do a quick review of your plan. In our experience, these reviews are relatively inexpensive. If changes are necessary, there will be additional costs, which will vary according to the plan's complexity and the time required.

Who Should Not Delay A Review?

In general, the estate plans for which an immediate review is highly recommended are those for clients who:

• have children by a prior marriage;
• have plans that make potentially large direct gifts to grandchildren;
• own a closely held business;
• have pre-existing irrevocable trusts that are not GST exempt; or
• suffer from health conditions that create a significant risk of death in 2010.

Also, anyone whose estate plan has not been reviewed in the past 10 to 15 years should arrange for a review, regardless of the outcome in Congress.

Window of Opportunity?

In addition to the complications that may arise if death occurs in 2010, "repeal" may offer current planning opportunities. For example, the gift tax rate in 2010 is 35%, the lowest that has applied for generations. It is possible Congress will retroactively increase that rate (in 2009 it was 45%, in 2011 it is supposed to go up to 55%). But, for clients willing to take a chance no retroactive increase will apply, or willing to structure the gift in a more complex manner so that it occurs only to the extent the favorable rates apply, this is a significant opportunity. It is especially significant for clients who are on the verge of making a large gift anyway. The Generation-Skipping Transfer Tax ("GST Tax") has also been repealed for 2010. This presents a number of interesting GST Tax planning opportunities, both for direct gifts to grandchildren and for distributions from trusts that previously could not make distributions to younger generation beneficiaries because the distribution would trigger a GST Tax. For larger situations, depending on the client's particular circumstances, there may be other planning options that offer significant tax savings, again subject to possible retroactive legislation.

We Are Here, Just Give Us a Call

We encourage all clients to consider asking us to conduct a quick review of their estate plans, especially those whose circumstances fit one or more of the situations described above. In the meantime, we will continue to monitor these developments closely.

ABOUT SCHIFF HARDIN LLP

Schiff Hardin's nationally and internationally recognized Private Clients, Trusts and Estates Group includes attorneys in offices coast-to-coast and serves clients across the United States and around the world. For more information, contact us.