I had a meeting with a nice family last week. Dad had died during this year and they were wanting me to settle Dad's estate. Dad had an estate of about $2,500,000 and Mom had an estate worth about $1,000,000. Dad had quite a bit of separate property that he had inherited.
Dad's Will left his entire estate to Mom. I'm confident that most lawyers would have followed the Will and put all of the assets into Mom's name during the Louisiana Succession, knowing that there is no federal estate tax for deaths occurring in 2010.
A light came on in my head during my meeting with Mom and the kids. It appeared to me that there would be significant estate tax when Mom dies in 2011 or beyond when the estate tax exemption is scheduled to be $1,000,000. If Mom dies with an estate of $3,500,000, then under the law as it now stands for deaths in 2011 and beyond, there will be $1,200,000 in estate tax when Mom dies.
I told the family, "Perhaps Mom should disclaim her inheritance from Dad and let Dad's estate pass down to the children." Under this scenario, the children will receive Dad's $2,500,000 estate free of estate tax (since Dad died in 2010 when we have no estate tax - apparently), and Mom will be left with an estate of $1,000,000. When Mom dies in 2011 or beyond, Mom's estate tax exemption will shield her estate from tax.
Most Louisiana general practice lawyers would not have utilized this estate tax savings approach. Heck, most Louisiana general practice lawyers have no idea this kind of stuff exists! At best, they would have lumped it all in her estate and then maybe advised some $13,000 gifting - which wouldn't put a dent in the potential estate tax bill since Mom is not in the best of health.
I realize that Congress could change the laws tomorrow but I believe this planning technique will save this family over $1,000,000