Unfortunately, according to both news sources, politics takes precedence over legislation. “The tax fight will serve as a proxy for the bigger political clashes of the year, including the size of government and the best way of handling the tepid economic recovery,” warns David M. Herszenhorn of the NY Times, “’…this is code for the role of the federal government, the debate over the size of government and the priorities of the nation.’”

According to David Wessel of the WSJ party lines are clearly drawn. “The Obama administration is pressing to extend the Bush tax cuts for everyone with an income under $250,000 a year and to raise taxes on those above. A recent Pew/National Journal poll found that only 11% of Democrats favor extending all the Bush tax cuts.” Meanwhile, “Republicans are happily staking out the no-new-taxes turf, playing to their traditional constituency. Pew says 52% of Republicans favor extending all the Bush tax cuts.”

It would certainly give taxpayers some comfort if legislation could be passed quickly and decisively, but Herszenhorn warns that it’s not likely to happen, “Given the partisan gridlock of recent months, there is a chance that the battle could go down to the last minute, or even — in the face of a stalemate — that the tax cuts could be allowed to expire completely, a development that… lawmakers in both parties say could be the worst outcome.”

Either way, the best advice we can give our readers is to be prepared. Just because lawmakers keep putting off a decision doesn’t mean you should. Talk to your attorney about the best way for your family to weather the coming storm. Be aware of changes to tax laws and update your estate plan accordingly.

But today’s blog post is not a cautionary tale about a family who put off their planning and regretted it, today’s post is about the peace and relief that forethought and planning brings not just to your family, but to you as the person making the plan.

In this article in Market Watch Chuck Jaffe tells the moving story of his brother Rob, who insisted 2 years ago on creating an estate plan even though he and his wife were both healthy. As Jaffe puts it, “While not pleasant subject matter, it was not morbid… you’d rather be drinking lemonade on the veranda, but it wasn’t a sharp stick in the eye.” However, when Rob became unexpectedly ill in May of this year the estate plan turned out to be a comfort to Rob and his family—such a comfort, according to Jaffe, that Rob “made me [Chuck] promise that I would write about him… when his time was up, because his story would help others.”

“People need to understand… how big a blessing it is to know — when their time comes — that they have everything in order, that they don’t need to stress or worry about how things they worked their whole life for are going to turn out. … I would not want to waste a minute of my life now having to do estate planning or worrying that I live long enough to get documents filed or whatever garbage comes with it… Focusing on death and dying while you are living, that’s easy; having to focus on death when you are dying, that would be unimaginable.”

In our business we frequently see how much easier it is for people to create a plan when they’re healthy, as opposed to the stress that comes with creating a plan when they are sick. Thank you Mr. Jaffe for sharing your brother’s moving story. We hope that your (and your brother’s) words will help motivate others to take comfort in planning ahead.

There is a lot of legal knowledge, personalization, and attention to detail that goes into an estate plan, even if you are young and think you have negligible assets. The U.S. News article quotes one Brooklyn-based attorney as saying “Unless you are single and have absolutely no money…you need an estate planner.” There are just too many things that can be forgotten, misunderstood, or just plain go wrong; and a small mistake can lead to big problems, even to the extent of invalidating your entire plan.

For example, did you know that…

• Although a will doesn’t usually have to be notarized, most states do require you to sign it in the presence of witnesses?
• You should always nominate at least one back-up guardian for your minor children in case your first choice is unwilling or unable?
• Although there is no estate tax in 2010, many heirs will actually end up paying more because of capital gains taxes?
• Your will becomes a public document upon your death, leaving your heirs open to criticism, claims and contest suits by predators and disgruntled relatives?

These are issues that could completely de-rail all your good intentions in a Do-It-Yourself document, but would be easy for an estate planning attorney to anticipate and address. Contact our office (or your own trusted, local attorney) to ensure that your estate plan is current, comprehensive, and complies with all state and federal regulations.

Keeping this in mind, here are 4 things to consider when choosing your executor or personal representative:

1. Your executor should be trustworthy. Your executor will be privy to all of your financial secrets: reviewing estate assets, determining your liabilities and paying off creditors, settling outstanding debts, and making distributions to heirs. Chances are you don’t want all that information spread throughout the family or community.
2. Your executor should be organized. The person you choose will be in charge of a number of detailed tasks, both large and small. He or she will be making lists of assets, working with your attorney to meet court deadlines, making timely distributions for estate taxes, and more. Missing or being late for one of these many steps can draw out the entire process, costing your heirs both time and money.
3. Your executor should be financially savvy. One of the responsibilities of executor is to keep the estate viable (making sure the mortgage and fees continue to be paid) during the probate process. If you have investment accounts you’ll want to ensure they won’t languish and lose their value before they can be distributed to your heirs.
4. Your executor should have heart. Although probate is a can be a difficult and detailed process, it is at its core about the people you love. Your executor should have the ability to be caring and compassionate during this emotional time.

If you don’t know anybody you would trust with all of these responsibilities don’t lose faith, there are other options. For example, you can choose a bank or financial institution as your executor, or you can ask your estate planning attorney to recommend a professional fiduciary.  The goal is to find someone who will serve you well and work with your attorney to ensure a smooth probate for all involved. Another approach is to create and fund a trust, where the duties after your demise would be handled by your Successor Trustee.  However, many of the same concerns that apply to your Executor (if you only have a Will) also apply to your Trustee.  Talk to your attorney about choices and the difference between administering a probate estate created by a Last Will and Testament, on the one hand,  versus a trust estate created by a Trust, on the other.  You may find the talk very helpful.

Well, we’re 4 months into 2010 and there is still no retroactive estate tax—but there is also still no rejoicing. This is because the lack of estate tax has actually created more problems than it has solved for the wealthy and affluent. According to this article in Financial Advisor Magazine the recent deaths of Texas billionaire Dan Duncan and Taco Bell founder Glen W. Bell, Jr. have only made it clear to tax attorneys that “lawsuits of various kinds will blossom in the estate-tax vacuum. The more money left on the table when the wealthy die, the more likely heirs are to fight for years over who should inherit.”

And you don’t have to be a billionaire to feel the consequences of the lack of tax. This article in Bloomberg Businessweek explains that those who think they’re catching a break on the estate tax could instead “…wind up paying stiff capital-gains taxes on inheritances. That’s because of the disappearance of what’s known as the “step-up” in basis, which allowed assets to be revalued for tax purposes at the time of death.”

But even this is preferable to finding yourself unintentionally disinherited by standard estate tax clauses included in older wills and trusts, a scenario that is more likely to happen than you may think if your spouse or parent hasn’t had their estate plan reviewed yet this year. For more on this see Attorney Gene Osofsky’s article, “Estate Tax Repeal Creates Planning Dilemmas:  Some Spouses May Now Be Left ‘Out In The Cold’”.

What is the bottom line? Every silver lining has a dark cloud, and you want to take every precaution possible to keep your heirs safe from the storm during this “gap year” in the estate tax.

You may assume that the receiving end of estate planning is the fun and easy part, but that is not always the case. Coming into an inheritance presents its own questions and challenges; financial, logistical, and personal.

Financial

Receiving an inheritance always means you have to think about taxes. Estate taxes, income taxes, property taxes… The estate tax this year is not as clear as it has been in the past, and you will probably want to have an attorney or accountant help you with it. Whether or not you have help, you will absolutely want to keep paperwork on everything. This includes paperwork from any transfers of inherited property received by you, as well as any and all of the original paperwork you can find for the acquisition of the inherited assets.

Logistical

There is a lot more to an inheritance than simply getting money and spending it. Are you the nominated guardian of young children, holding those assets in trust for their benefit? Or perhaps you are the beneficiary of a trust, and your receipt of the assets is subject to the terms of that trust. Do you have to use the money for school? Do you need the approval of a trustee before you can spend it? Hopefully you are working with a trustee you know and trust, but if you and the trustee disagree you may need mediation or even your own attorney to assist with resolution of any dispute.

Personal

Inherited assets are often very personal and fraught with emotion. Should you really sell the house grandma lived in for decades and use the money to take a cruise? (If so, wait until after taxes, if any, are determined before you buy the tickets.) Would your parents have wanted you to use the money to pay for a wedding, or save it for your own retirement? Do you want to take the summer home that’s been in your family for generations and own it jointly with your new spouse, or keep the property on your side of the family?

Whatever you choose to do with your inheritance, it’s likely you’ll need some guidance from a knowledgeable and trustworthy professional. Your estate planning or elder law attorney can help.   His or her knowledge of the probate system, estate taxes, and how to protect your newly inherited assets can be very valuable to you at the receiving end of your loved one’s estate plan.

Your first reaction might be “Of course not!” But don’t speak too soon. Most estate plans are created at least in part to protect heirs (generally spouses and children) from the sometimes devastating blow of estate taxes; but with the estate tax in a confusing state of flux this year some of these plans won’t work as their creators intended—and heirs may end up looking for a way to protect themselves against the unintended consequences of well-intentioned estate plans.

 With the threat of the return of the estate tax in 2011 for estates valued over $1,000,000, the surviving spouse of a person dying this year may now have good reason to consider a timely disclaimer.  Doing so may eliminate tax as assets pass on down to the couple’s children.  For more information on how this works, see our article entiled “Repeal of Estate Tax May Warrant a Fresh Look At the Use of Disclaimers To Avoid Death Tax”

Although the use of a Disclaimer may be a good solution in some cases, there are no easy general answers to the question of whether you should exercise the right of disclaimer.  Much will depend upon the state of the estate tax law at the time of your loved one’s death.  One thing is clear, however:   most people would be well advised to include the option of disclaimer in their trust or wills, “just in case”.   If you have any questions whatsoever about an inheritance—or about your own estate plan—contact your elder law or estate planning attorney for help.

Has your will or trust been reviewed or updated in the past 3-5 years?

If you answered yes to these questions then you are two steps ahead of 2/3 of the rest of Americans. But the next question is the big one:

Does your family or executor know where your legal documents are stored, and are they able to access them?

Having a will or a trust is essential, but it doesn’t do any good if nobody can find it after you’re gone. Olympic medalist Florence Griffith Joyner (“Flo-Jo”) supposedly had a will when she tragically passed away at the age of 38, but because her husband was never able to locate the original document, a neutral administrator had to be appointed by the court to execute the estate; and whether her estate was executed according to her wishes is anybody’s guess.

A will or a trust often contains sensitive and emotional information, and for that reason many people (understandably) want to keep these documents private; but spending any amount of time or money on your estate planning documents won’t help your family if they can’t locate—or don’t have access to—those documents after your death.

We suggest having an earnest conversation with your family (or one or two select members at the very least) about the existence and location of your personal documents. Although they don’t have to know what is in your will or trust, knowing where those documents are can ensure that the time and money you spent creating them isn’t wasted.

An ethical will can be anything from a letter to your children expressing your love and hope that they carry on your values, to a novella length memoir detailing your life experiences. But what about those people who don’t have the ability or inclination to articulate their thoughts in pen and ink? Well, more and more these people are turning to the camera and making their ethical wills on video.

A video will, as suggested by this article in the Wall Street Journal, is an unparalleled way to let the younger generation know about your feelings and values. “No matter how clear your memories of someone may be, if you have them on the screen in front of you, talking to you, there’s a qualitative difference.” And a video will, if made correctly in the presence of your estate planning attorney, might even have the added benefit of preventing disputes and bickering between your heirs later on.

What we like best about the idea of ethical or video wills is the personal touch. Although we work every day with the “dry and boring legal jargon”, we know that underneath all that an estate plan is about love and values—it’s about family. And an ethical or video will is a way to add a personal touch to the formal written Will or Trust, which is still necessary to meet legal requirements. So, consider doing both together to pass on, not only your assets, but also your values and hopes.

Health Care- Your health care documents should include: an Advanced Health Care Directive (or Health Care Power of Attorney), a Nomination of Conservator, and a HIPAA Release. If you have minor children you should also have a document giving a close friend or family member authorization to make health care decisions for your child in case you and your spouse are unavailable in an emergency. Take note of the date these were signed, and any changes in your health status.   We recommend that Health Care documents be re-signed every 3- -5 years to keep them “fresh”.

Minor Children and Guardianship-Documents pertaining to minor children include your Nomination of Guardian, Exclusion of Guardianship (if you intend to exclude any persons who might otherwise be close family members and have “priority” under the law if you fail to nominate others), and often a Memorandum of Intent. If circumstances or relationships have changed and you are uncomfortable with anybody listed in the documents now serving as guardian, you’ll want to execute a new one. If your minor child is a teen and almost grown he or she may now want to have some input in the process. The Memorandum of Intent is not always an official document; rather, it is your letter of instruction to your guardians and other fiduciaries. As such, this document will probably change the most over the years. The good news is that you probably don’t need to make changes in your Memorandum through our office, however if you do make changes, please let us know or even send us a copy.

Legal Updates-Estate planning is a very fluid area of law. Tax laws have a tendency to change (for example the estate tax law which is slated to expire completely in 2010 and return again in full force in 2011), and incorporating those changes into your documents may be necesssary to keep your plan working the way you intend.

Reviewing your estate plan is not as intimidating as you might think, especially when you know exactly what to look for. Taking an hour now to review your plan may save your loved ones many long hours in the future. Don’t you think it’s worth it? If you feel you need professional assistance, we are here to help.

The passage of time is inevitable, as is the change it brings; and when your life changes it’s important that your estate plan change with it. Reviewing your estate plan every 1-3 years is essential to keeping it up to date and working the way you intended it to work. Luckily, reviewing your estate plan can be quick and easy if you know what you’re looking for. Here is a list of 6 key components you’ll want to review regularly:

• Fiduciaries
• Assets
• Distribution and Beneficiaries
• Health Care
• Guardianship and documents pertaining to minor children
• Legal Updates

If we’re lucky, our lives are constantly changing—our families evolve, our finances improve or decline, we meet and form strong relationships with knowledgeable friends and professionals. It only makes sense that your estate plan should change too. What seemed best for your family 4 years ago might not be the ideal situation now. By reviewing and updating these 6 components on a regular basis, and touching base with your attorney, you will insure that your estate plan will continue to protect yourself and your family the way you intended it to when you first created it.

Although Hodges gives a decent description of her experience with the various kits, her final verdict is inconclusive. But what does come through loud and clear in the article is that a “Do-It-Yourself” (“DIY”) Trust or Will isn’t as easy as it seems, and that anyone with a significant amount of assets (and by significant we mean a house or life-insurance policies) should not be doing it themselves; “the program presented a pop-up note indicating that people with more than $1 million in assets might need an attorney…” One million may sound like a lot, but as mentioned above, just about anybody with a house or life insurance policy is going to fall into this category.

What Hodges and her husband discovered (and we think this would be the experience of most people looking for a DIY solution to estate planning) is that there is a lot more to creating a will or trust than a simple distribution of assets. Most people have specific wishes for leaving their home to their spouse; for ensuring that the surviving spouse has access to joint assets but does not have the ability to bypass your children and leave everything to a new husband or wife if they remarry; for earmarking a certain percentage of the estate for brothers or sisters, nieces or nephews; and so much more. Add to this the complicated and changing state and federal estate tax laws and DIY estate planning kits can be a frustrating recipe for disaster.

The goal of estate planning is not only to distribute your assets, but also to protect them—and to protect and provide for the family and loved ones who are left behind. Ultimately, no program can understand this and help you with it the way a living, feeling, and experienced estate planning attorney can.