Even with the federal estate tax repealed in 2010, savvy taxpayers are continuing to do estate planning because the tax will roar back to life in 2011, with a new maximum rate of 55%, which is higher than before, combined with a new exemption of only $1 million, lower than before.

The Senate is currently considering a bill that would cut back on the tax savings generated by one technique that is especially popular with sophisticated individuals and their advisors: The grantor retained annuity trust, or GRAT. The Small Business Lending Fund Act of 2010, which the House of Representatives passed earlier this summer, requires a minimum 10-year term for all new GRATs, eliminates the ability to create a GRAT without causing a taxable gift and requires that the annuity amount payable to the grantor not decrease during the first 10 years of the annuity term.

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