For instance, the unified applicable exclusion amount is scheduled to increase from $1,000,000 in 2003 to $1,500,000 in 2004, $2,000,000 in 2006, and $3,500,000 in 2009. The maximum estate tax rate is scheduled to decrease from 49% in 2003 to 48% in 2004, 47% in 2005, 46% in 2006, and 45% in 2007. Then, in 2010, the estate tax will be repealed only to be reinstated again in 2011 based on 2001 tax laws. For 2010, inherited property will not receive a step-up in basis, but will have a basis equal to the lesser of the decedent's adjusted basis or the property's fair market value at the decedent's date of death, with some adjustments.

The lifetime gift exemption remains at $1,000,000, although the maximum gift tax rate will equal the maximum estate tax rate through 2009 and then will equal the maximum individual income tax rate.

The Generation-Skipping Transfer (GST) tax exemption increases from $1,120,000 in 2003 to $1,500,000 in 2004 and then follows the estate tax exemption schedule, with the GST tax rate equal to the maximum estate tax rate. The GST tax will also be repealed in 2010 and reinstated in 2011.

All these changes can make it difficult to determine whether your estate plan should be revised to take advantage of the changes. Some points to consider include:

• Determine how to incorporate higher exemption amounts in your estate plan. Many estate planning documents indicate that trusts should be funded with assets equal to the unified applicable exclusion amount or GST exemption amount. Evaluate whether those amounts are still appropriate considering those amounts will increase significantly. Those amounts may leave more than you intended to your grandchildren or may place so much in a credit shelter or other trust that your spouse may receive very little of your estate outright. You may want to put a cap on the amounts placed in trust, even if that means you won't fully utilize your exemption amounts.
  
  
• Make sure you have sufficient solely-owned assets to fund these trusts. Once you have decided how much should be placed in trust, you need to have sufficient assets titled in your own name.
  
  
• Consider whether you need to add a disclaimer provision to your estate planning documents. This provision details what happens if one of your heirs disclaims his/her inheritance. That way, your heirs can decide after your death how much should be placed in various trusts. For instance, a husband can leave all his assets to his wife with the condition that any disclaimed assets go into a trust paying her income for life, then passing the principal to their children after her death. This gives the wife the opportunity to divide the assets based on her needs and wishes at the time of her husband's death.
  
  
• Review your gifting strategies. You may still want to continue gifting strategies that utilize your annual gift tax exclusion ($11,000 in 2003 or $22,000 if the gift is split with your spouse) and your lifetime gift exclusion amount. For those with estates large enough to be subject to estate taxes, these strategies remove assets from your taxable estate without paying any gift taxes. When using your lifetime exemption amount of $1,000,000, look for ways to maximize your tax-free gift. For instance, individuals who transfer noncontrolling interests in businesses, farms, real estate, and other assets during their lifetime may be able to assign a minority interest discount to the gift's value. By gifting assets to certain types of trusts, such as qualified personal residence trusts and grantor retained annuity trusts, you can place an asset in trust now, use the asset for a period of time, and place a lower value on the gift.
  
  
• Consider making charitable contributions during your lifetime. While charitable contributions made after death are free of estate taxes, that may not be a consideration due to higher exemption amounts. Charitable contributions made during your lifetime will still lower your taxable estate and you receive an income tax deduction.
  
  
• Reevaluate your life insurance needs. Since the estate tax will only be repealed for the year 2010, you may still want life insurance to help your heirs deal with estate taxes. Even if you die in the year 2010, any inherited assets will not receive a step-up in basis, perhaps leaving your heirs with a large capital gains tax burden.
  
  
• Review how specific assets are distributed. In 2010, inherited property will have a basis equal to the lesser of the decedent's adjusted basis or the property's fair market value at the decedent's date of death, with three exceptions: 1) $1,300,000 of basis can be added to assets; 2) unused capital losses, net operating losses, and certain built-in losses can increase this cap; 3) an additional $3,000,000 of basis can be added to assets inherited by a surviving spouse. Due to these exceptions, you may want to specifically allocate assets with low basis to your spouse and assets with a higher basis to other heirs to ensure the step-up in basis is maximized.