You Know the Importance of Planning… But Do Your Aging Parents?
August 5, 2010
If you have been reading our blog then you know that this year—the year without a federal estate tax—is an important year, and that next year—when the estate tax returns—will be an even more important year for planning and reviewing your estate. You know this… but do your parents?
Kimberly Palmer, author of this article in U.S. News and World Report says that “bringing up the estate tax with your aging parents can be as awkward as inquiring after their sex life.” Talking about any kind of estate planning with your parents can indeed be awkward, but as Palmer points out it is extremely important… especially now when the repeal and reinstatement of the estate tax means that “ignoring the issue could mean giving Uncle Sam a big chunk of one’s estate inadvertently.”
So how can you bring up the topic of estate planning with your parents without them thinking that you’re more interested in your inheritance than your parents’ well-being? The article mentioned above has a few ideas, including:
- Talk about your own estate planning experience and how relieved you are that everything is in place.
- Talk about recent celebrity deaths that have been in the news: George Steinbrenner, Michael Jackson, etc.
- Mention how concerned you are about the uncertain estate tax situation.
Of course, the best policy is to just be honest. Tell your parents truthfully that you are concerned about their financial stability, about keeping the family peace, about your grasping uncle Mickey taking the antique dining set you’ve loved since you were a child. Explain that you only want to help… but remember that the choice is ultimately theirs. As author Deborah Jacobs says in the article, “if they don’t want to talk about money, then you need to drop it and accept that this is not something you should pursue… If you have tense times towards the end of your parents’ life because you’re talking about estate planning, it will stay with you forever, and it’s just not worth it.”
Not Just Estate Tax Anymore
August 1, 2010
Anyone who has been following our blog knows that the expiring Bush tax cuts (including the repeal of the estate tax this year and the tax’s reinstatement next year) have given lawmakers no end of trouble as they struggle and debate—and debate and struggle—to agree on new tax legislation moving forward. In fact, The Wall Street Journal calls the issue “a ticking time bomb,” while the New York Times warns that “an epic fight is brewing.” It seems that the only thing everyone does agree on is that something has to be done before December 31, 2010.
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.
Will Billionaire Steinbrenner’s Death Inspire Congress to Reinstate the Estate Tax?
July 15, 2010
Common superstition says that famous deaths come in threes, but the death of New York Yankees owner George Steinbrenner on July 13 makes four billionaire deaths in 2010. It’s hard to deny the significance of such events in a year when there is no estate tax.
According to the Associated Press Steinbrenner’s family is set to receive a tax break of “about $328 million” because of the estate tax repeal this year. This number, along with the millions of dollars saved (that would otherwise have gone to pay estate taxes) by the families of Dan L. Duncan, Walter Shorenstein, and Mary Janet Morse Cargill may inspire Congress to take action on the issue of the estate tax before the year is over. The Washington Post quotes Senator Bernard Sanders of R.I. as saying, “In the midst of this terrible recession, the idea of giving billionaires a massive tax break is obscene… Already we have four billionaire families who are not paying taxes — Steinbrenner’s being the last one. Many billions are being lost. We have to address that reality right now.”
Although there is still some talk of the possibility of the estate tax being reinstated retroactively, most lawmakers and attorneys agree that the further into 2010 we get the less likely this becomes. But missing out on the estate taxes of four billionaires has to hurt, and the members of Congress are not likely to drag their feet much longer. One way or another, we can soon expect to see the issue of the estate tax become a hot topic of debate in Washington. Our firm will keep you abreast of any changes to the law that could affect you, your loved ones, or your estate.
How to Plan for the Future While Estate Tax Debate Continues in the Senate
July 13, 2010
With all the estate tax proposals currently floating around the Senate the future of the estate tax is anybody’s guess… but that doesn’t mean we’ll stop trying to figure it out. A recent article in the Wall Street Journal touches on some of the more recent (and more controversial) proposals floating around Washington.
The proposal that is currently getting the most attention comes from Vermont independent Sen. Bernie Sanders and three Senate Democrats who say that “It’s time for multi-millionaires and billionaires to pay their fair share.” And pay they would! According to Sanders’ proposal “the [estate tax] exemption would be $3.5 million for an individual or as much as $7 million for a couple, with a tax rate of 45%. But estates with taxable assets between $10 million and $50 million would pay a 50% rate, and estates valued above $50 million would pay 55%. A further 10% surtax would apply to assets above $500 million.”
Of course, it’s too early to get worked up just yet, Sanders’ proposal is just one of many right now, and the debate still rages in the Senate with no clear winner in sight. Of course, if no action is taken the estate tax will come back in 2011 with a 55% tax rate on estates above a mere $1 million.
Either way, you’ll want to be prepared, and the only way to do that is to keep in contact with your estate planner and make sure that your plan is designed to handle anything. Although it may be tempting to wait to update your estate plan until a clear decision is made, all that really does is leave your family unprepared if something should happen to you while the tax is in flux. Contact our office to find out what adjustments should be made to your estate plan to keep your family protected while lawmakers continue to debate the future of the estate tax.
More News About the Repealed Estate Tax
June 17, 2010
Six months into 2010 and the estate tax repeal is still making news. This time it’s a story about Texas billionaire Dan L. Duncan who died in March, leaving all of his billions to his spouse, family and various charitable organizations… and none to the government:
“Had his life ended three months earlier, Mr. Duncan’s riches — Forbes magazine estimated his worth at $9 billion, ranking him as the 74th wealthiest in the world — would have been subject to a federal tax of at least 45 percent. If he had lived past Jan. 1, 2011, the rate would be even higher… Instead, because Congress allowed the tax to lapse for one year and gave all estates a free pass in 2010, Mr. Duncan’s four children and four grandchildren stand to collect billions that in any other year would have gone to the Treasury.”
According to the NY Times article this news is meeting with mixed reactions. Opponents of the estate tax (sometimes called the death tax) are hoping to make the repeal permanent. Others, however, don’t agree:
“’The ultrawealthy in this country will still be able to pass on enormous wealth to the next generation,’ said Chuck Collins, who studies income inequality and has worked with billionaires like Warren E. Buffett and Bill Gates to promote an estate tax. Mr. Collins argues that the tax is a ‘recycling program for economic opportunity.’”
Whatever happens in future years, considering that this year is already half over, it can only be hoped that heirs and executors won’t have to worry about the tax being reinstated for persons dying in 2010, although Congress could still reinstate it retroactively; this leaves us free to look ahead and plan for 2011 when the estate tax is now set to return at a whopping 55%. If you’re wondering how all these changes will impact your estate planning, we may be able to help with some answers and with some techniques to “hedge” against the return of the estate tax.
Take Action in the Face of Estate Tax Uncertainty
May 13, 2010
If you’ve been reading our blog regularly then you know that the 2010 estate tax repeal has caused no end of confusion and uncertainty; not only for those who have been dealing with probate and trust administration since the tax was first repealed, but also for those who are trying to think ahead and do the right thing for their spouses and children. Many people have come to the erroneous conclusion that they have no choice but to stand by and wait until the Washington politicians make up their minds about whether or not to restore the estate tax retroactively—but we’re here to tell you that you don’t have to wait to protect your assets and your family.
Forbes.com recently published an article entitled How to Protect Your Family From Estate Tax Uncertainty. This article suggests that there are a number of steps you can take right now to protect your heirs and your assets, even if you don’t know what changes lawmakers may enact tomorrow or 2 months from now. Their suggestions include everything from working with your estate planning attorney on contingency plans to account for anomalies such as no estate tax or minimum exemptions, to common sense action items such as taking the time now to track your cost basis for assets (to help your executor and heirs determine the change in value for tax purposes.) The Forbes article also suggests that some people may want to plan to save by giving—taking advantage of the gift tax exemption amounts. For more on a special technique involving the use of “Disclaimers” in the current estate tax climate, see Attorney Osofsky’s recently published article.
There are always steps you can take to ensure that your estate plan is up to date, our firm can be your compass and your guide; we can help your family prepare for whatever the future may have in store.
When and Why You Might Turn Down An Inheritance
February 25, 2010
Would you ever turn down an inheritance?
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.
News and Updates About the Estate Tax
February 17, 2010
A month and a half into 2010 and Congress’ failure to stop the lapse in estate tax is still making waves. These two trusted news sources explain why having “no estate tax” this year should worry you.
One of the first reasons you should be worried, as revealed by this article in the Wall Street Journal, is that a larger base of estates will actually end up paying more this year rather than less; “Under last year’s law, estates up to $3.5 million, or $7 million for married couples, were exempt from federal tax. This year that law has been replaced by a fiendishly complex levy raising taxes on the assets of those with little as $1.3 million. It will affect the heirs of at least 50,000 U.S. taxpayers who die this year, whereas the old law affected only about 15,000 estates a year.”
Another main cause of worry, explains the New York Times, is the possible reinstatement of the estate tax by congress, effective retroactively; “The general view is that Congress wants to, and should, re-enact the estate tax retroactive to the beginning of this year,” [says tax specialist Ian Shane] “In January, February or March that’s easy, but as the year goes on it becomes more difficult.”
Of course the biggest worry estate planners have is the effect this year-long lapse will have on existing plans. Couples who already have an existing estate plan are advised to get their documents reviewed—and possibly revised—to prevent “standard clauses” from having unanticipated effects. As Joanne Johnson, head of the American wealth advisory service of J. P. Morgan explained to the NY Times, “It’s common to find language like ‘I hereby fund this trust to the maximum amount I can shelter from federal estate tax.’ The rest can then pass tax-free to the spouse. Such wording is risky as long as the estate tax is off the books… because there is no maximum.” What ends up happening is that everything goes into the trust for the kids, leaving the spouse with nothing.
What is the lesson here? The lapse in the estate tax may not be the boon it first appears to be. Talk with your estate planning attorney to find out how the new laws may affect your family.
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