The financial tsunami that has passed over us since last September is bringing with it changes in tax laws. Existing law regarding the federal estate tax is surely one of those areas of the law that is bound to reflect the new conditions. Under the so-called Bush tax cuts, the federal estate tax was due to be phased out in 2010. Given the political and economic changes, that is not likely to happen. Accordingly, stay sensitive to the amount of the so-called equivalent exemption, or the amount of the credit that each of us is given against the federal estate tax. That equivalent exemption is currently $3.5 million and may be kept at that level or changed when Congress acts some time before December 31.

Another area to watch is that relating to health care powers of attorney and living wills. Currently, these documents are optional. People’s reaction to the documents can vary depending upon their moral and ethical beliefs. Given the high cost of medical care, particularly in the last days of life, there is increasing discussion about some way of making Medicare coverage contingent upon a person having a Living Will or Advance Directive, or at least about giving a credit toward Medicare Part B premiums to people who have such documents.  Since the content of these advanced directives can vary somewhat from state to state, and involve a person’s moral, ethical and religious beliefs about the difficult subject of end-of-life decision-making, such change is certain to be controversial.