The most recent measure to reform the estate tax laws -- or the "death tax" -- would have phased out the federal estate and gift taxes by the year 2010. Although approved by the House and Senate earlier this year (2000), it was vetoed by President Clinton.

But estate planning is too important for entrepreneurs to put off until the political debate is resolved. So what's a small-business person to do?

The first step is the get the facts.

Currently, the top federal estate-tax rate is 55%. Through the end of 2001 the lifetime exclusion amount (the value of the estate over which estate-tax returns must be filed) is $675,000. That gift-and-estate-tax exclusion is scheduled to gradually rise to $1 million by the year 2006. There's an annual exclusion for up to $10,000 for gifts to each of any number of people; that means that a husband and wife can each transfer up to $10,000 a year in cash or assets to a child without triggering a tax liability. There is usually no tax on bequests or gifts between spouses.

Should a small-business owner act, or wait for the laws to change?

Consider this: Even under rosy reform scenarios -- something along the lines of the tax phaseout Congress passed this past summer -- some form of estate tax will remain for nine years. That represents a large and dangerous window of vulnerability for any growing company. If you suspect that your future heirs won't be able to pay Uncle Sam without conducting a fire sale of your company or its key assets, you owe it to everyone (and to your business as well) to explore estate-planning options sooner rather than later.

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For more information, check out this Guide to Estate Planning