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Document 59 of 187.

August 27, 2000, Sunday

SECTION: Business; Ed. Final; Pg. 13G

LENGTH: 394 words

HEADLINE: ESTATE TAX LAW REFORM POSSIBLE, BUT NOT DONE

BYLINE: By John Brown

BODY:

The American system of estate taxation is about to undergo a welcome change courtesy of election year politics.

Congress recently voted to phase out estate taxes over a 10-year period. President Clinton responded by enthusiastically vetoing the bill.

Is estate tax reform dead? Don't bury the corpse yet.

Estate tax reform, if not a total "phased in" repeal, is this campaign season's political football. If the Republicans take the White House, then estate tax repeal is likely. But even Democrats promise substantial increases in the amount of assets one can leave at death without being subject to estate taxes. Figures as high as $5 million are mentioned.

So what should the prudent business owner do?

First, take no immediate action on the assumption that the estate tax system will change. Realistically, substantial change may take 10 years or more. If you haven't yet taken the appropriate actions to reduce estate taxes under the existing tax regime, don't delay. Change, should it occur, will not occur in the near term.

Second, maintain flexibility in your estate planning. Planning to avoid estate taxes ordinarily consists of transferring assets, during your lifetime, out of your estate. To be effective for estate tax purposes, shifts of ownership must be irrevocable and permanent. If, however, estate taxes are repealed or substantially eliminated, these types of irrevocable and permanent transfers may have been unnecessary.

While seemingly contradictory, the best course is to maintain flexibility when making irrevocable decisions. There are many techniques available that allow business owners to give up ownership, yet maintain control of, their assets. It also is possible to surrender something now that becomes valuable only at death; for example, the death benefit of life insurance proceeds.

Finally, don't give away assets simply to avoid estate taxes. Instead, transfer those assets only when such action is consistent with broader estate planning objectives. Base decisions on what is best for your family and your long-term goals.

Estate taxes are unlikely to go away for a decade or longer. This particular tax originally was levied in 1916 to help pay the cost of fighting World War I. Eighty-four years later, we've won the war, but the battle to defeat estate taxes rages on.

NOTES:
John Brown is a partner in Minor & Brown, a Denver-based law firm that specializes in developing exit strategies for business owners, including the sale of their business. To reach Brown, call (303) 320-1053 or e-mail jbrown@minorbrown.com.
Exit Strategies

LOAD-DATE: August 30, 2000

Document 59 of 187.


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