Tax Bill: What's Really Inside?

Similarly, Marvin Tuttle Jr., executive director of the Financial Planning Association (FPA), Denver, says the FPA is happ to see the act create some short-term certainty.

“”However, this bill should be considered a critical first step to finding a permanent, workable solution to our nation’s tax laws,” Tuttle says. “It is imperative that Congress seriously consider longer term fixes to our tax code problems versus stringing together a series of short-term patches.”

Michael Ban, a principal Ernst & Young L.L.P., New York, says the act will provide for more clarity in estate planning, and especially when it comes to allocation of generation-skipping tax (GST) exemptions in life insurance trust arrangements.

But “I am somewhat skeptical that its a clear win for the life insurance industry that would drive significant sales,” Ban says. “While life insurance trusts are popular, I don’t know

that uncertainty or inability to allocate GST would prevent a sale.”

Meanwhile, the increase in the 2011 estate, gift and GST exemptions to $5 million, from $1 million if Congress had failed to act, may reduce the need for insurance, Ban says.

“Fewer estates will presumably be paying tax, and many will pay less due to the higher exemption,” Ban says. “That said, the legislation is active for 2 years, which certainly leaves the door open for significant changes to the estate and gift area in the future. I feel planners should consider the current environment as well as the potential for future increases when advising clients on the amount and structure of life insurance in estate planning. This is particularly important given the potential changes that can occur over time relating to a client insurability and related costs.”