As 2013 estate tax limbo looms, wealth advisors are not wasting time advising millionaire families to take advantage of tax benefits likely never to be offered again.

After a year of complete confusion over the immediate future of estate taxes, the recent budget battle on Capitol Hill has gotten the public muttering about class warfare, but for wealthy Americans, long-term clarity may never be easy to find again.

“The estate tax morphed into a shapeshifter and may never be solid after the 2010 estate tax guessing game,” says veteran tax lawyer and estate planner Martin Shenkman.

As the last 12 months taught us, a lot can happen between now and 2013, when the current tax regime is scheduled to “morph” again.

Last year, the public was outraged over the roughly $8.75 billion in potential tax revenue that a cash-hungry government lost after five billionaires — George Steinbrenner, Walter Shorenstein, Dan Duncan, Mary Cargill and John Kluge — died during last year’s temporary estate tax repeal.

But then, the upper-middle-class voters who fund reelection campaigns were worried that Washington would end up taking that $8.75 billion out of their own inheritances if the estate tax exemption was allowed to reset at $1 million this year.

Congress finally moved to close that upper-middle-class liability by keeping the exemption at $5 million, and since then there’s barely a peep on either side of the aisle.

For example, Rep. Paul Ryan of Wisconsin’s “Path to Prosperity” budget plan is 73 pages long and goes into exhaustive detail on topics like food stamps and Medicare reform, but doesn’t mention the federal estate tax once.

And even the 10% “billionaire surcharge” that Sen. Bernie Sanders of Vermont was backing this year now seems dead in the water.

Now’s the time to lock in exemptions

This may not always be the case. Upper-middle-class families who dodged the estate bullet again this year are rushing to take advantage of the current tax breaks while they exist.

Planners like Martin Shenkman are advising their clients to reconsider asset protection trusts and other vehicles before the rules change again.

“Until this year, the $1 million gift exemption constrained this planning,” he says. “The gift exemption now is $5 million. In 2013, the opportunity might be gone!”

In a world where the IRS is only now issuing guidance on how accountants are supposed to file tax returns for people who inherited money last year, the planning horizon has shrunk enormously from the days when advisors could guide their clients across decades with ease.

Now, there’s a sense that everything beyond December 31, 2012 is a black hole.

On one extreme, the exemption could reset at $1 million and a 55% maximum tax rate.

On the other, the tax could be repealed permanently. And in the middle, the current rules could be extended, or tinkered with in any number of ways.

At this point, nobody even wants to handicap this race any more.

This is, of course, a good marketing opportunity for estate planners who can help their clients reduce their taxable estates and lock in current tax rates before things change.

Charitable gifts are rising as well, especially among institutions that cater to mass affluent investors who might — or might not — be subject to the estate tax after 2012.

Vanguard has seen charitable activity jump a record 60% over last year, largely due to a lack of confidence that the $5 million gift tax exemption — or even the deductibility of donations — will not be around forever.

Meanwhile, this lack of confidence has its own ramifications as the planners urge their clients to lock in what we know is true over the next few years before the tax code potentially shifts again.

“The uncertainty about estate taxation is a small part of a larger uncertainty that seems to be plaguing the nation’s economy,” Bill Ahern, director of policy and communications at the Tax Foundation, told me awhile back.

“No one knows what taxes they’re going to be paying in the near future, so they’re holding back on activities that could benefit the economy.”

Rich in rhetorical value, but not in revenue

Really wealthy families, of course, should have already done a lot of their heavy estate planning by the time they booked their first few million dollars.

For them, only the complete and permanent repeal of the estate tax will make much impact to their long-term outlook.

Likewise, while billionaires dying without owing the government a dime makes great political theater, the $8 billion extra that Steinbrenner and company got to pass on to their heirs is not going to move the $1 trillion deficit needle one way or the other.

As UC-Davis estate planning professor Joel Dobris told me recently, the fight over whether the richest 3,500 families in the country are taxed or not has mostly symbolic value.

Even in 2009, when the federal estate tax was in force at roughly the same levels that apply this year, it only brought in $20 billion.

The bottom line is that income tax was always the primary engine of federal revenue, and after last year’s $858 billion extension of the Bush-era income tax cuts, $20 billion more or less just won’t matter.

But while it might not be worth it to Congress to fight over, it makes a lot of difference to advisors and their clients.

Scott Martin, contributing editor, The Trust Advisor Blog. Jerry Cooper and Steve Maimes contributed to the editing and research.

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