Effective estate planning often requires more than a one-time snapshot of your assets and your intentions for how you would like them distributed after you are gone. From time to time income and estate tax laws change or expire and your assets and personal life may change over the course of years as well.

As you may know recent and upcoming changes in federal estate and gift taxes could have play an important role in your estate planning decisions.

There has recently been a large amount of volatility in estate tax laws. No federal estate tax was levied in 2010, but estate taxes were supposed to be reinstated in 2011 and the exemption was to be dropped to $1 million. Congress changed the laws at the last minute to include a $5 million exemption.

The recent estate tax law changes made by Congress are set to expire on December 31, 2012. Current law states that the exemption for estate tax will be returned to $1 million at the beginning of 2013, but this law is always subject to change.

It is important for Arizona professionals to have flexibility in their estate planning because changes can be made at any time. Changes in the amounts of the exemption may make different tools more or less useful. When the exemption is lower, a bypass trust agreement was often employed to more effectively use of estate tax exemption to protect your assets.

A new provision in legislation allows the unused portion of the federal estate exemption of the first spouse to die to be used by the surviving spouse, eliminating the need for a bypass trust agreement. This provision will expire with the new law at the end of 2012.

Arizona professionals should reevaluate their estate planning documents each time the estate tax laws are changed to ensure that their current documents won't be changed negatively by the new laws.

Source: Dental Economics "The state of estate planning" Brian Hufford, June 2011