Clinging to Life for Estate Tax Exemption

It's December 24. Your rich old great-aunt Jane is in the terminal stages of cancer, and in the past few weeks has deteriorated to the point that her life is now being sustained by medical machinery. There's little hope she'll ever wake, let alone leave the hospital. It's the holiday, but everyone's already in mourning.

After many tears and a long talk, you and her other close family members, as well as Jane's doctors, have decided that it's kindest to pull the plug and let Aunt Jane go.

But there's a dilemma: The total of your great-aunt's estate is in the $5 million to $7 million range, and an estate tax levy of 45 percent means a big chunk of that will be left to the government.

But if you keep Aunt Jane alive for one more week, hooked up to the machines, and pull the plug after New Year's, her estate will be exempted completely from the tax.

What do you do?

This may be a hypothetical situation here, but according to the Wall Street Journal, it's a choice some are currently facing as the clock ticks toward a one-year reprieve from the tax.

From the Wall Street Journal article:

One wealthy, terminally ill real-estate entrepreneur has told his doctors he is determined to live until the law changes. "Whenever he wakes up," says his lawyer, "He says: 'What day is it? Is it Jan. 1 yet?'"

It's not just families of those on life support who are considering an end in 2010 to avoid the estate tax.

According to the WSJ article, "The situation is causing at least one person to add the prospect of euthanasia to his estate-planning mix, according to Mr. Katzenstein of Proskauer Rose. An elderly, infirm client of his recently asked whether undergoing euthanasia next year in Holland, where it's legal, might allow his estate to dodge the tax.

His answer: Yes."

In its current form, the estate tax dies tonight.