The Wealth Channel:  “Now that the initial shock and surprise resulting from the long-overdue estate tax reform has subsided, there’s been some time to pause and reflect. At first glance, the immediate reaction of many estate planners that I spoke with was that Armageddon had arrived. This certainly is not the case, but paralysis or procrastination will result in lost opportunity. In the discussion that follows, I’ll try to debunk some of the myths that have been offered in the immediate aftermath of the new estate tax rules. The implications of the law will be viewed prospectively and I will, by design, ignore 2010’s rather interesting situation where the compromise bill provided a choice to be made by executors on whether to elect the federal estate tax with the basis stepup or no federal estate tax with a modified carryover basis for assets left to heirs.

Myth: The increase in the exemption amount to $5 million and the reduction in the estate tax rate to 35 percent were the biggest surprises in the estate tax compromise.

Reality: The attempts by some in Congress to reach a more timely compromise in the 2008 to 2010 interval revealed that there would not be enough votes in the Senate to fix the federal estate tax at the 2009 levels of a $3.5 million exemption and a 45 percent tax rate. In fact, the Senate had previously agreed in principle to these critical components of the law as finally enacted.

The biggest surprise in the new legislation was the reunification of the estate and gift tax systems with the increase in the gift tax exemption to $5 million. This presents many tax-saving opportunities.”