In June, the stage was set for a showdown on repeal of the estate tax. Senate Democrats defeated President Bushs call for permanent repeal and the president and the Republicans vowed to fight for it.
It appears to be a battle that will continue to rage at least over the next several months, possibly the next several years.
Meanwhile, high net-worth consumers across the country may still be uncertain about their own estate planning efforts. Is it best for your clients to wait and gamble that the estate tax will disappear permanently in 2010?
The question has bearing on whether you should continue to offer estate tax riders with the life insurance plans you offer to clients. I think you should. Lets look at the issues.
Personal estate tax planning should not, I believe, be kept on hold while those in Washington debate the merits of keeping it or eliminating it now or in the future. The premise behind estate planning is that consumers are taking control of their finances and planning for the future.
In view of that, you should be advising your clients to keep that control, no matter what the legislators are debating. They cant put their personal finances on hold until a decision is reached.
Besides, even when these issues are decided, estate plans will still be an important way to meet wealth transfer needs.
Consumer uncertainty about this issue isnt new. When President Bush first started talking about this in 2001, it generated uncertainty. Insurance companies saw a downturn in the number of second-to-die coverage plans they wrote during the first quarter of that year. Customers were reluctant to make estate planning decisions, it appears, especially in light of the possibility that the estate tax might go away entirely.
Interestingly, that reluctance was highest at the lower end of the estate planning market–estates of $1 million to $5 million. At the higher end, estates of $5 million to $10 million or more, consumers recognized that they would need estate planning anyway, so there was little drop off in consumer demand for second-to-die products.