Apr 1, 2005 12:00 PM, By John J. Scroggin, partner, Scroggin & Company, P.C., Roswell, Ga.

By: By John J. Scroggin, partner, Scroggin & Company, P.C., Roswell, Ga.

For decades, estate planning has been dominated by techniques designed to minimize a confiscatory federal estate tax. But higher exemption levels created by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)¹ have significantly reduced the number of Americans subject to the federal estate tax. Only about 2 percent of all estates were expected to be taxable in 2004; in 2009, it's expected to drop to 0.3 percent.²

As a result, tax planning for most Americans is shifting from a focus on federal transfer tax avoidance to a focus on income tax avoidance.³ Of course, this focus on basis planning will increase dramatically if President Bush is able to accomplish his stated objective of permanently repealing the federal estate tax. Even though elimination is unlikely, Congress will probably increase the federal estate tax exemptions, continuing the trend of reducing the number of Americans who are subject to a federal estate tax.

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