B. H. G R E E N B E R G & A S S O C I A T E S

ATTORNEYS & COUNSELORS AT LAW

26 West Dry Creek Circle, SUITE 520

LITTLETON, COLORADO 80120

(303)730-7100 Fax: (303)730-7195 Email:

What's New:

  Action Alert:  Is your estate plan out of date in light of the new estate tax law changes and increases?.  What to do?  Review your estate plan annually and read more about this below.  If you have a traditional Marital-Family Trust plan, your plan may require immediate attention.  Please contact our office ASAP to schedule a review meeting.

Email Distribution List.   As you know, a revolution in the delivery of information is underway.  Our firm has joined in this conversion to e-information.  We have adopted an electronic system of delivering Client Alert Letters.  To register for this list, go to our home page (the first page of our web site) and you can register right there for this list.  If you don't have email, then set up a free email account at either msn.com, iwon.com or yahoo.com using their free web based email.

  Electronic Newsletter.   We now publish our firm newsletter here on our web site.  This will better assist us in getting information to you faster and more accurately.  The latest issue of our newsletter is just below on this page.  If you don't have access to e-information, as a client of our firm, you will still receive this newsletter periodically through regular mail. 

Current schedule of events:

Funding and Titling Assessments

These titling meetings are scheduled as needed upon client request. Due to subject matter, these are limited to existing clients of our firm. These meetings teach clients about proper titling of assets, beneficiary designations and about funding of trusts.  To schedule your own Funding Meeting, please contact our office and we will be happy to assist you.

Tax Wise Estate Planning Assessments

We conduct Tax Wise Estate Planning Assessments daily. In these meetings, we review your current planning arrangements with your current planning goals. We make recommendations to bring your estate planning up to speed. Just call our office to schedule your own Tax Wise Estate Planning Assessment.  These assessments are available to the public at a nominal charge..

Estate Planning Review Meetings

We offer review meetings for clients. If you haven't reviewed your estate planning in the last 12 months, it is time for a review meeting. Reviewing your plan costs very little and protects so much.  Please call our office to schedule your estate planning review meeting today.  We use an 18 step review process to help you calibrate your estate plan with changing laws and situations.

Tax Wise Estate Planning Seminars

We offer estate planning seminars on a reservation basis. If you would like to arrange for one of these tax-wise estate planning seminars for your office, company, organization or civic group, give our office a call. We will be happy to assist you in planning one of these programs for your group or organization.

What to do When Your Spouse Dies Workshops

Each year we offer this workshop for clients that teaches the step-by-step approach necessary for proper administration of a deceased spouse's estate. This intensive workshop is very important in learning how to be a Personal Representative or Trustee for your spouse's estate or trust. This workshop is available only for clients of our firm.  Please call our office to find out about the next time this valuable program will occur.

Here is our latest newsletter:

CLIENT UPDATE LETTER

HIPAA: THE HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996

 If you have been to see a doctor recently, or to a hospital or care facility you have discovered a bewildering array of forms dealing with something called HIPAA.  HIPAA is the Health Insurance Portability and Accountability Act of 1996.  Passed over seven years ago, this law is only now making waves dealing with the privacy and release of your medical information and records.

 Over several reports to you, we will suggest ways that you can incorporate the requirements of HIPAA into your estate planning.  The purpose of this report is to introduce you to some of the issues of HIPAA on your planning.  We are only starting to discover the impact of HIPAA; to realize its delayed effect, just ask yourself why you are only now seeing HIPAA forms from your doctor caused by a federal law that was passed years ago.

 HIPAA IMPACT ON YOUR ESTATE PLANNING

One of the mandated purposes of HIPAA is to impact the management of health information.  This can relate to your estate plan in two (and possibly more) ways.  First, you have Powers of Attorney.  Your Health Care Power of Attorney specifically is designed to permit someone you have designated to make health care decisions for you when you cannot speak for yourself.

HIPAA prevents the release of your health information without your permission.  This may include emergencies  when you don't your information kept secret from family members and your Health Care Agent.  Suffice it to say, you want your health and medical information provided to the agent in your Power of Attorney so they can be fully informed and can make proper decisions for you.

Whether existing Powers of Attorney must be amended is a matter of significant debate.  If you are in the process of amending or updating your Powers of Attorney, then a new Power of Attorney can provide that your agent shall also be your "Personal Representative" as is defined under HIPAA for the purpose of receiving your health information.  Unfortunately, the specific language that may be required is not presently available.

STEPS TO TAKE NOW TO PROTECT YOURSELF AND YOUR HEALTH INFORMATION

1. Contact each of your doctors, dentists, hospitals and health care provider that you currently work with and ask them for any form they require to authorize release of your information and complete it with the list of agents in your Health Care Power of Attorney.

2. You need to keep these authorizations updated if you update your Powers of Attorney.

3. Make sure your complete list of agents is included on the authorizations.

4. Obtain additional authorization forms and have them filled out and signed by each of your agents naming you and each of your alternate agents as persons authorized to receive health information on your agent.  Why is this necessary?  Remember that your Power of Attorney provides for the successor agent to become active if the primary or prior agent ceases to act due to disability (or any other reason).  Armed with the authorizations signed by each agent, then the successor agent will be able to obtain health information that may be necessary to deal with the disability of the primary or prior agent.  Obviously, you will need to discuss this with each of your agents.

HOLIDAY TIME-ESTATE PLANNING IN THE NEWS  December, 2003 by Bernard H. Greenberg

Happy Holidays to everyone, its that time of year once again and hopefully you and yours are blessed with happiness and health this year and for those to come.  With the capture of Saddam Hussein there is much in the news and we have a crucial national election coming in 2004 that may significantly affect your estate planning.

Estate planning itself is much in the news lately.  I hope that you have read the reports in both the newspapers about the upcoming increase in the estate tax exemption on 1/1/2004 to $1.5 million; the uncoupling of the federal death tax with the state death tax credit and the reports about how many Americans have not yet started their estate planning.  These are all interesting developments and several are commented on here or elsewhere in this newsletter.

My message for you at this holiday time is to remember why you did your estate planning.  The essence of planning is to protect what and whom we care about.  While taxes and probate and other issues may be important in one’s estate plan, they should not be the driving force behind your plan.  That driving force should be the people that you seek to protect or benefit.

Because estate planning is done for others (family, children, or charities that we support) it cannot be approached in a “cookie-cutter” manner.  I can’t tell you the damage done by people who have used (or had suggested to them) fill-in-the-blank forms for their estate planning.  On the whole, these forms do much more harm then good.

I hope that you will pass along to those you care about the reasons that you cared enough about family to do your estate plan and encourage them to do the same.  That’s a gift that everyone can be proud about this holiday season.  All the best to you and yours for 2004!

DO YOU HAVE A CASE AGAINST A BROKER?  September, 2003

If you read the newspapers you will see almost daily ads by attorneys seeking as clients people who have lost in the stock market.  Many people have lost gobs of money in the market in the past three or so years and you may be one of them.  Just because you have lost money does not mean you can recover that money from a broker.  If you invest your own money and do not rely on a broker for advise or assistance, then your losses are not recoverable.  On the other hand if you have hired a firm to be your trustee, or to assist you in managing your money, then you may have a case. 

A Growth industry has sprung up in representing people who have lost money in the stock market.  As mentioned above, how can analyze your own situation to know if your market losses may be recoverable. Obviously, this article should not be relied upon to make such an important analysis and decision.  However, if you start with the steps listed you will be moving in the right direction.  Here are the steps to begin with:

1.      Have your situation analyzed by an experienced attorney who can determine your rights and the strength or weakness of your case.

2.      Keep all records including communication records with your broker, bank or advisor.  These communications may be helpful in analyzing or pursuing your rights.

3.     Compare your personal investments with those that the broker has invested for you.  If you have invested as aggressively or more aggressively than the broker, than you may not have a case.  Contact our office today and we can refer you to the experts who can help analyze your situation and advise you about whether you have a case.

EFFECTS OF THE GROWING ESTATE TAX EXEMPTION ON YOUR TRUSTS  September, 2003

The downturn in the stock market over the last three years coupled with the increasing estate tax exemption (see the article below) has caused many people to ask if they have the right estate plan.  This is a very important question that requires careful analysis of your individual situation, assets and goals.  We explore below how significant this question can be.

Lets assume that you have an estate (including your life insurance) that totals $975,000.  Just two years ago, the proper way to plan for that estate would be to consider a "double-exemption" estate plan designed to make use of each spouse's $675,000 exemption against the estate tax.  But in 2003 the exemption for a single person has risen to $1,000,000 and in 2004 and 2005 that single person's exemption will be $1.5 million.  Now remember our estate in this scenario is $975,000 and that is below the current exemption of $1million.  Should this same couple use the "double-exemption" trusts?  The answer is not as clear cut as you might think.

First, differing models of estate and asset growth must be considered.  Second, the family situation and goals must be carefully analyzed to synchronize the plan with the family facts and goals.  Remember there are non-tax reasons that can be accomplished with the trusts that cannot be accomplished with "All to Spouse" Wills.  So there are at least three factors that may necessitate keeping your trust based plan.

However, if the non-tax reasons for trust planning do not exist (and will never exist) in your thinking, and there is no legitimate tax purpose to using trusts, then you can consider returning to "All to Spouse" planning.  This newsletter and this web site in other places discussed the tax reasons your trusts can be beneficial.  What are the non-tax reasons to use trusts that you should analyze?  Here are several:

• A trust for the surviving spouse can protect the spouse from creditors and predators that the spouse is not protected from if they own assets directly.  For many this is an important feature of trust based estate planning.
• Trusts can still afford flexibility to the surviving spouse concerning children and grandchildren.  This flexibility can be drafted in the trust and would not be lost.
• The spouse can be protected in old age or disability and the on-going management of assets can be accomplished through trust based planning.
• Where the surviving spouse is from a second or later marriage, then trusts must be considered to carry out the provisions of a marital agreement, or protect children and grandchildren from the earlier marriage.

On the other hand, like with everything, there are other factors like:

• Trust based planning can be more expensive than distributing assets directly to the surviving spouse.
• The family's goals may have changed from those to be achieved by the trust based plan.
• The advantages listed above may not be relevant to the family.
• The family's assets may have declined so substantially that there are little advantages to trusts.

So what do you do and how do you analyze your situation?  Review your estate planning immediately if you haven't done so in the last six months.  Review your planning every year in light of the changing exemption (which are discussed below).  Remember that in 2011 the exemption returns to the 2003 level of $1million unless the laws are changed.  The market may not always be down and can even go back to prior levels.  The only way to stay current with your estate planning is to stay current on your estate plan reviews.  Call our office today and set your estate plan review meeting.

JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003

We have another major tax bill.  Passed by Congress on May 23, 2003 JGTRRA is the latest in what seems to be a never-ending line of major revisions to the Internal Revenue Code.  This legislation focuses primarily on income tax issues designed to promote job formation, economic growth and income tax relief.  It has provoked another major political firestorm in Washington, which is discussed below. 

The legislation provides tax relief on differing levels to taxpayers in different circumstances of approximately $350 million.  The bill passed easily in the House of Representatives, but led to a major brouhaha in the Senate before final passage.  Here is a summary of several of the bill’s provisions: 

·         Increase in the child credit for 2003 and 2004 to $1,000 per child and back to $700 for years 2005-2008; $800 for 2009 and $1,000 for 2010 and after.

·         Acceleration of relief from the marriage penalty in years 2003 and 2004.

·         Alternative tax relief for individual and joint tax filers, but this relief drops in 2005 which could lead to future problems requiring further congressional “fixes” of the tax code.

·         Make the marginal rates of 25, 28, 33, and 35% retroactive to 1/1/2003.

·         Reduce but not eliminate the tax on capital gains from 20% to 15% (from 10% to 5% for taxpayers in the 10 and 15% brackets) effective after 5/6/2003 through 12/31/2008.  Capital gains rates drop to 0% for lower income taxpayers in 2008.

·         There are other features of this legislation that are not listed here.  Please consult with your tax advisor to determine how this new tax applies to you and how to plan your finances under these new rules.

Note that this new legislation does not address the estate tax rules that we have advised you of previously.  The scheduled increases in the estate tax exemption remain with a one-year phase out of the estate tax in 2010 and a return to a $1 million exemption for 2011.  You should expect further tax law changes in light of this situation.

Here is the political controversy:  The Democrats insisted that tax credits be provided in the form of cash payments to citizens that pay no taxes.  To me it remains an oxymoron to give a tax refund or credit to someone who didn’t pay any tax.  This controversy illustrates a point we have discussed previously.  One political party believes that your money is not really yours, but theirs to do with what they think is best.  The other party believes that your money is yours and if you pay too much of it in taxes, when you tax relief is provided, you are just getting back some of your own money.  This principle is so basic and fundamental I am at a loss to understand how it could be disputed.  This is not to imply that all welfare should be discontinued, on the contrary, there are people in our society who need our help.  I do think though that we should call welfare what it is and not pretend that it is tax relief to someone who didn’t pay tax in the first place.  What do you think?  I would love to hear your thoughts on this issue, feel free to email me if you’d like. 

If you haven’t reviewed your estate plan or your titling with us since June of 2002, it is time to do so as soon as possible.  Reviewing the terms of your estate planning documents must be matched with a detailed review of the titles to each asset and the beneficiary designations that may exist.  Please contact our office at 303.730.7100 to schedule your review meeting at your earliest convenience.

Titling and Funding in Estate Planning  May, 2003

If you have followed this Newsletter over the past 17 years, you will note a recurring theme involving the proper titling of assets. This theme is crucial to the proper working of your estate plan. There are generally two phases to anyone’s estate planning. Phase one is the design and preparation of the estate plan documents themselves, such as Will, Trusts, and Powers of Attorney. Phase two involves the titling of assets so that the person whose estate is being planned will have an estate plan that works.

ACTION ALERT: Reviewing Your Estate Plan and Titling under EGTRRA

If you read this newsletter below, you will find basic information on the importance of periodically reviewing your estate planning.  On April 22, 2002 we forwarded an Action Alert to all our clients who subscribe to our Client Email List.  This latest Action Alert concerns the importance of reviewing your estate plan in 2002 if you have not already done so, especially in light of the changes your estate plan may face due to EGTRRA. 

Reviewing your titling is also of utmost importance.  Even if the terms of your estate plan meet your current goals, and meet current legal requirements, your plan could be defeated if your assets are not titled in synchronization with the plan documents.  Here are several examples of why this is so important:

 1.        Your plan calls for a division of assets passing through your Will or Trust among children.  However, you set up several bank accounts with just one child and named one other child as the beneficiary of an insurance policy.  Result: your plan is defeated.  The insurance passes pursuant to the beneficiary designation not according to the plan.  The bank accounts pass to the other joint owner, not into the plan to be divided as you wish.

2.        Your plan is a two-trust plan designed to take advantage of both spouse’s exemption vs. the federal estate tax.  However, you have not divided assets between yourself and your spouse, leaving assets in joint tenancy and leaving your spouse as beneficiary of your insurance.  Result: your plan is defeated.  At the first death, no assets will pass through the plan of the spouse dying first.  This results in the loss of the entire exemption of that spouse.  The children could face needless estate tax at the death of the second spouse and the surviving spouse will not receive crucial protection vs. creditors and predators.

3.        Your plan calls for a trust to be created for a certain child’s share due to special needs of that child.  However, you have an insurance policy that was to be used for this share.  The policy still names the child as beneficiary.  Result: your plan is defeated.  Since the beneficiary designation would pass the proceeds to the child, the named-beneficiary, the trust for that child will not be properly funded and the protections that you sought for that child will be lost.

Bernie’s Column, June 2003

Many of you know that I dedicate time and resources in helping the National MS Society (NMSS) in the ongoing fight against multiple sclerosis.  I have served as a member of the Board of Trustees of the Colorado Chapter of NMSS for several years and currently chair the Planned Giving Committee.  That committee develops programs and strategies that help donors to the Colorado Chapter coordinate their estate planning with giving to NMSS.  In addition I have ridden the MS150 for the last 11 consecutive years  Some of you have been kind enough to ask about these efforts and also assist in them.  Upon request, if you would like to help sponsor me in the MS150, you can do so by making out a check to the NMSS-Colorado Chapter and sending it to our office.  We would be honored to submit it on your behalf.  On behalf of the more than 6300 people in Colorado who suffer from MS, your help and caring means so much, thank you.

Impact of the 2002 Elections, is Estate Tax Repeal only Temporary? November, 2002

On June 13, 2002, the Senate defeated making repeal of the estate tax permanent.  Under current law, the repeal of the federal death tax is now effective for only one year-January 1, 2010 to December 31, 2010.  

Is Your Estate Plan the Right Plan: Action Alert Bernard H. Greenberg, May 2002

On April 22, 2002 we forwarded an Action Alert to all our clients who subscribe to our Client Email List.  This latest Action Alert concerns the importance of reviewing your estate plan in 2002 if you have not already done so, especially in light of the changes your estate plan may face due to EGTRRA.  This new tax legislation is discussed further below and on the News page of our web site.  The April 22^nd Action Alert discusses the complex process of reviewing estate plans under the EGTRRA ten year system.  How EGTRRA may affect your plan from year to year as the estate tax exemption is increased and the state death tax credit is phased out is now part of the review process.  We have created an 18 step process for reviewing your estate plan.  These steps can help you calibrate your estate planning documents with changing situations and needs while assessing how your plan is affected by each year’s EGTRRA’s changes.  Reviewing your plan is now more important than ever.  If you haven’t reviewed your estate plan with us since June of 1991, it is time to do so again.  Please contact our office at 303.730.7100 to schedule your review meeting today.

With the passage of EGTRRA last year, many people wonder whether they still the right estate plan.  This is an important question that requires analysis of many factors. Some of these factors include:

1. Current estate values
2. Current goals for the family
3. Status of existing plan design and documents
4. Assessment of the political situation
5. Risk tolerance of political changes and the tax system
6. Risk tolerance of estate taxes
7. Risk tolerance of estate settlement procedures and expenses

The best way to apply these factors to your situation is have an estate planning review meeting. Our office conducts these sessions for a modest cost. Contact our office at 303.730.7100 to schedule your estate planning review meeting today.

It may be possible to substantially simplify your plan based on the higher estate tax exemptions.  On the other hand, EGTRRA has introduced enormous complexity in estate planning with the changing exemptions based on the year of death.  In addition, the political issues of whether the long term benefits of EGTRRA will ever be phased in are in hot debate.  For details on how the estate tax exemption is changed by EGTRRA, please continue reading below.

The Economic Growth & Tax Relief Reconciliation Act of 2001

On June 8, 2001, President Bush signed into law EGTRRA.  It includes new estate tax exemption limits and a repeal of the estate tax in 2010.  The law sunsets itself by repealing itself back to the estate tax laws in effect this year, 2001.   Did we get true estate tax reform?  Probably not, but there are many features in this new tax law that you must be aware of.  Read more details below and get your estate plan reviewed immediately.  Don't rely on politicians to plan your estate and protect your property and family.

Most estate plans are structured so that estate taxes, if any, are deferred to the second spouse’s death. This type of plan known as a marital deduction or double exemption plan allows the surviving spouse to live on all the family property while permitting the use of two exemptions against the federal estate tax.  This type of estate plan is also called a "zero-estate tax first death plan".  This plan works well for married couples with estates of less than $3,000,000 to save estate taxes for children or other beneficiaries.  If the family estate is larger than $3,000,000, a different approach may be warranted.  Please note that over the phase in of the EGTRRA, this information is subject to substantial change.   EGTRRA   may, if fully phased in, result in this article becoming moot.

The purpose of a "zero-estate tax first death" estate plan is as full use as possible of each spouse's exemption against the federal transfer tax (also referred to here as the "estate tax").  Since this type of estate plan essentially defers estate tax to the time of the second death, the estate tax effect is measured upon the second death.  Paying estate taxes at the second death requires an analysis of the federal transfer tax rate system.  To summarize, each estate dollar that exceeds the estate tax exemption in the year of death (for 2000-2001 the exemption is $675,000) pays estate tax.  The actual computation is more complicated than that since the rates are based on the first estate dollar, not the first dollar over the exemption.

An estate (we are presuming for the surviving spouse) of over the exemption would be subject to estate tax.  The rates range from 38% to 55% based on the size of the estate.  For estates ranging from $675,000 to $750,000, the rate is 38%.  Once the estate exceeds $3,000,000 the rate is the highest marginal rate of 55%.  This rate differential of 18 points is known as the estate tax bracket run.  The estate tax brackets run from 38%-55% as the estate grows to the $3,000,000 level.  This bracket run concept forms the basis of the planning approach of paying estate taxes at the first death in order to save even more in estate taxes at the second death.  The examples below illustrate this concept.  Please note that these figures relate to the estate tax rules in effect prior to the passage of EGTRRA 2001 and you will need to modify your calculations accordingly.

Estate Plan Example I: 

In the first example, the estate plan is a "zero-estate tax first death" plan.  We assume an estate for the married couple of $5,000,000.  Since there is no tax at the first death, the estate taxes have been deferred to the second death.  Assume that the husband dies first this year.  His trust plan allocates his estate tax exemption of $675,000 since the year of death is 2000.  This then leaves a taxable estate for the surviving spouse consisting of their property and the value of the Marital QTIP Trust created by the spouse dying first.  The net estate tax, assuming the surviving spouse dies the next year in 2001 is: $1,917,938.  Without the "zero-estate tax first death" estate plan, the estate taxes would have been:  $2,307,750.  So this plan did achieve its goal of substantial estate tax savings.

But what if the structure of the plan is changed to cause estate taxes to be paid at the first death?  What would be the purpose of doing so?  In the first example above, we are only using one run of the estate tax brackets at the time of the second death.  That run in brackets from 38% to 55% is not used at the first death.  If we can run the brackets twice, once at the first death and again at the second death, can we save more in estate taxes?  Yes we can, and here are the numbers:

Estate Plan Example II:

If the estate plan is restructured to force the payment of estate taxes at the first death, we would pay $805,250 in estate taxes at the first death.  Then at the second death, we again pay estate taxes of: $871,500.  The two estate tax bites added together total: $1,717,013.  Remember what our total estate tax was in Example I:  it was $1,917,938.  Using Example II, we have reduced the total estate tax burden on this family to: $1,717,013, or a net savings in estate taxes of: $201,000.  This is incredible since the conventional wisdom is to defer tax as long as possible, yet that conventional wisdom is incorrect with larger estates because of the benefit of running the estate tax brackets twice instead of just once at the second death.

How should you think about this?  If your family's estate has grown to $3,000,000 or higher, then you should immediately assess the benefits of double bracket run planning.  As you can see, this results in even greater estate tax savings.  You will need to plan for the payment of estate tax at the first death with this approach.  The best way to proceed is to review your estate plan as soon as possible.

What To Do When Your Spouse Dies: A Guide for the Surviving Spouse

Reviewing Your Estate Plan   A Crucial Part of Your Estate Planning

Another good way to stay current with your estate planning is review it periodically. We suggest that you review your estate plan whenever it interests you and to formally review it with us every 18 to 24 months. These estate planning review meetings can be scheduled at your convenience.  Remember, if you don't keep your estate plan current, it may not work the way you want and won't meet your goals.

Reviewing your estate plan is a simple process. Here are the foolproof steps.

Reviewing your estate plan is a simple process that requires only some of your time and attention. Here are the foolproof steps to follow:

1. Take your notebook and read through the documents.
2. Write down your questions for the review meeting.
3. Prepare an updated list of your assets and how they are titled.
4. Call our office at 730-7100 and ask to schedule your estate plan review meeting.

That's all there is to it.

About our Schedule of Events and Funding Workshops

Some of the programs are private and some are public. When you call our office at 730-7100, let us know in which program you are interested. We will let you know if the program is open, the location, and any cost.

Proper titling of assets is crucial to your estate plan working. This is especially true if you have a revocable trust. Our Funding and Titling Workshops are designed to assist you to do your own titling. We encourage you to take advantage of these programs.

Thank you for your interest and your continuing participation in your estate planning.

Return to our home page.