¹During President Clinton's first term, a number of proposals were advanced that would have effectively increased the estate and gift taxes. These included a limit on the number of gift tax annual exclusions, attempts to legislatively overturn D. Clifford Crummey, 397 F2d 82 (9th Cir. 1968), and attacks on family limited partnerships, valuation techniques and other common wealth-transfer tools.

²The Estate Tax Elimination Act, 106th Cong, 1st Sess.

³The Death Tax Elimination Act of 2000, 106th Cong., 2d Sess.

⁴See Study on Reform of the Estate and Gift Tax System (AICPA, 2001)(hereinafter, "AICPA Study"), at 91 Tax Notes 307 (4/9/01); see also, "AICPA Study on Reform of the Estate and Gift Tax System," 32 The Tax Adviser 334 (May 2001).

⁵The sunset provision was inserted into the EGTRRA to protect it from challenge under the "Byrd rule" (named for its author, Sen. Robert Byrd (D-WVA)). The purpose of the Byrd rule is to keep budget act provisions budget-related. Thus, any provision that has revenue effects outside of the 10-year budget period is subject to removal from the bill on challenge by any Senator. The challenge can be overcome only by a 60-vote majority. Because Senate leaders felt that the EGTRRA's provisions would not be supported by 60 members, the sunset provision was inserted to avoid violation of the Byrd rule; see Kaufman, "The Estate and Gift Tax: Implications of the 2001 Tax Act," 92 Tax Notes 949 (8/13/01), p. 952.

⁶The scheduled increase in the effective exemption amount under the Tax Reform Act of 1997 (to $1 million) will still apply, as will any inflation-adjusted increases in the generation-skipping transfer (GST) tax exemption.

⁷While the maximum estate tax rates are lowered, the minimum rates applying to taxable estates effectively increase due to increases in the effective exemption amount. While in 2001, the smallest taxable estate faces a marginal tax rate of 37%, by 2004, the lowest tax rate applicable to a taxable estate will increase to 45%.

⁸It has been suggested that the retention of the gift tax exclusion at $1 million was necessary to prevent wealthy taxpayers from gifting away increasingly higher amounts between 2004 and 2010 before the sunset provisions took effect and returned the effective exemption amount to $1 million in 2011; see, e.g., Pennell, "Summary of the Estate Planning Provisions of the EGTRRA of 2001," 17 Audio Estate Planner, No. 4 (Summer 2001).

⁹See, e.g., Gardner, Chapter 21, GST Compliance: Preparing the 706 and 709: Allocating the Exemption (24th Annual Notre Dame Tax and Estate Planning Institute, 1998).

¹⁰These provisions were enacted largely due to the efforts and suggestions of a multigroup task force that included members of the AICPA, the Tax and the Real Property, Probate and Trust Law Sections of the American Bar Association, the American Bankers Association and the American College of Trust and Estate Counsel, and were explicitly endorsed in the AICPA Study, note 4 supra.

¹¹Notice 2001-50, IRB 2001-34, 189.

The EGTRRA has been heralded as the death of the estate tax.

¹²See Harmon, "The Estate Tax: Repeal or Reform?," 91 Tax Notes 2072 (6/18/01).

¹³See Aucutt, "Conference Proceedings of the ABA Section of Taxation Meeting" (Chicago, IL, 8/24/01).

¹⁴In fact, this is already happening in some states. For example, under New York Tax Law Section 952(c), the estate tax paid is tied to the amount allowed as a Federal credit in 1998. Unless the New York legislature reduces the amount of the Federal estate tax payable to the state, New York taxpayers will likely pay more total estate tax in 20022004 than under previous law.

¹⁵For example, Sheppard, "Debt in Contemplation of Death," 91 Tax Notes 1655 (6/4/01), describes a scheme (attributed to Prof. Mitchell Gans, Hofstra University School of Law) in which a taxpayer has an asset worth $100 million with a zero basis. The taxpayer borrows $100 million against the asset and bequeaths the cash to his child. The encumbered asset (with little or no net value) is then bequeathed to a tax-exempt entity, eliminating the built-in gain.