Estate Planners, Take a Bow!

As the effective federal estate tax exemption has risen, guess what? The number of estates subject to tax has fallen.

In his Wealth Report column in The Wall Street Journal, Robert Frank suggests that the fall is so sharp that others factors may have contributed. Estate planning, for instance:

While tax planning for the wealthy has been lucrative for years, it has accelerated with the recent advent of complex trust structures, family limited partnerships, grantor trusts, various investment products, hybrid life-insurance policies and charitable-giving vehicles. The tax-strategy business has become an important component of the wealth-management business.

David Handler, a trust-and-estate attorney with Kirkland & Ellis in Chicago, believes that most of the drop in estate taxes is because of the rising wealth threshold. But he says more sophisticated tax advice has also helped reduce total collections.

"The investment firms have really put estate planning on the front burner," says Mr. Handler. "People in my business are always coming up with new structures and adding all sort of technical tweaks."

Rising exemptions and a drop in the top estate tax rate haven't hurt the inheritances of charities. From 2000 to 2005, charitable deductions rose more than 20%.