Estate planning under the Bush tax cuts

This paper describes the estate, gift and generation-skipping transfer (GST) tax reductions made by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)(1) and how estate planners are dealing with the challenges presented by the changes made by EGTRRA. EGTRRA affects decisions concerning the timing of taxable transfers, complicates the drafting of estate planning documents, creates the potential for controversy concerning the proper construction of wills and trusts, promotes harmful tax competition among the various states, and influences liquidity planning and charitable giving. Carryover basis presents special problems, especially for real estate developers, who rely on the adjustment to basis allowed at death to bail out of negative basis assets. In light of the uncertainty about what law will be in effect when a person dies, there is a premium on giving independent fiduciaries broad amendment and gifting powers.