Wednesday, June 30, 2010

Still Stuck in Estate Tax "Purgatory"!*

Here's an oxymoron for you--as an advisor, I want to be able to share an "update" with my clients and readers regarding the estate tax "repeal" situation, and there's really no solid update to report!  So, instead, I'll share a little bit of what has been going on behind the scenes...

There have at least been some meetings that have taken place.  There have been a number of different bills introduced, but nothing has really gotten very far.  The three most likely scenarios at this point are as follows:

1) A reinstatement of the estate tax with an exemption of $3.5 Million and a tax rate of 45%.

2) A reinstatement of the estate tax with an exemption of $5 Million and a tax rate of 35%.

3) Congress does nothing, and the estate tax comes back with an exemption of $1 Million and a tax rate of 55%.

Generally, Republicans favor the highest exemption and lowest tax rate, while Democrats generally favor reinstatement at the middle numbers (2009 levels).

Two developments have taken place seemingly make it less and less likely that there will be any action taken soon, however.

First, although Democratic leaders seemed willing to agree to Republican demands in recent talks, they still broke down.  It seems that there are many rank and file Democrats who are now willing to let the tax issue take care of itself, preferring to not take the political risk of appearing to pass legislation favoring the richest Americans--especially so soon before the November elections.

The Democratic leadership appears to be unwilling to bring legislation forward that does not have the support of the majority of the party.  One Senator is quoted as saying more than 80% may be opposed to the increased exemption and lower tax rate discussed by party leaders.  Thus, it may be that nothing is addressed prior to November and that any action taken would be rushed, as was the case with the failed effort to address the situation at the end of 2009.

The second issue that originally looked promising in terms of pushing early action was that of retroactive application of any reinstatement.  Retroactive application was "iffy" during the best of times.  Now, it seems like a long shot.

In late March, Texas billionaire Dan Duncan died.  With an estate estimated at $9 Billion dollars, Duncan was listed on Forbes as the world's 74th wealthiest person.  A lawsuit was a certainty if retroactivity was pursued by Congress at any point.  Now there are significant resources that would obviously be available to oppose any attempt to apply taxes retroactively.  Thus, the compelling urgency originally felt by those who want to reinstate the tax retroactively, already losing steam with each passing day, has now been undercut severely--and probably completely.

So, these are just a few key tidbits--I definitely haven't covered everything that's going on right now--but it doesn't appear that we'll be leaving estate tax "purgatory" quite yet.

*Adapted from the Planning Partners Press.

Thursday, June 24, 2010

What Do Hurricanes and Estate Planning Have in Common?

Hurricane season officially begins in June.  And despite the best efforts and intentions of meteorologists, the precise path, time of arrival and strength of these potentially devastating storms cannot always be predicted with complete accuracy.  Local governments do their best to convince people residing in or visiting vulnerable areas to prepare for the worst.  Many heed the warnings.  Sadly, others do not, and often suffer tragic consequences.

We think the onset of hurricane season serves as an apt metaphor about the importance of estate planning.  Like meteorologists, whose host of sophisticated scientific tools and resources do not necessarily enable them to predict a hurricane's path and strength, neither we nor you can predict exactly what the future holds.  

Fortunately, like emergency response planners, we can plan for the future's possibilities by helping our clients prepare an estate plan customized to their unique families and goals.  Your plan can protect your financial well-being today and tomorrow, provide for your loved ones after you are gone, and enable you to leave a lasting legacy for family and society alike.  

Your plan can also help prepare you and your spouse or other loved ones for changes to your physical well-being, through incapacity planning, healthcare directives, durable powers of attorney and more.  Access to the DocuBank Healthcare Directives Registry, which we provide to our clients free of charge, can prove invaluable in this regard.  It ensures that your healthcare directives are immediately available to hospitals and family members in the event of an emergency.  It also provides vital information to doctors, such as medical conditions, allergies and emergency contacts, to name a few.  

One aspect of effective estate planning that some families overlook, at their peril, is the importance of keeping their plan up-to-date.  The fact is, an outdated plan can actually be worse than having no plan at all.  We recommend that families review their estate plan at least once every two years, and whenever a significant change has taken place in their situation or that of a family member.  We can also help our clients update their DocuBank account to reflect any changes to their health or wishes concerning whom they would like to make decisions for them, or the care they would like to receive if they cannot speak for themselves.  

By keeping your estate plan up-to-date, you can truly prepare for the unexpected.  And, help ensure that everyone you love, and everything you own, will be protected--today, tomorrow and beyond.