Monday, December 29, 2008

Estate Tax Change is Coming

It seems that anyone running for office is bragging about how a vote for them will bring change. It’s almost like every candidate runs a version of the same add touting their prowess and attacking their opponent. If you are like me you can’t wait for the election just so we don’t have to see anymore ridiculous political ads. Does this election really mean change is coming? Well time will tell, however you can be certain that change is coming to estate taxes and estate planning. Will you be ready for these changes?

What Will the Exemption Be?

There are two pending proposals in Congress, one to freeze the exemption at $2 million and the other to freeze the 2009 exemption of $3.5 million. If Congress and President do not agree, then we will have an unlimited exemption in 2010 and a $1 million exemption for 2011 and beyond. Most believe that something will happen. But what will the change be and are you ready for any change that may occur?

Will the Exemption be Portable?

The next issue is whether the exemption will be portable between spouses. This is of vital importance since the exemption is not presently portable. This means that in order for a married couple to create two estate tax exemptions, they must undertake specialized planning and title their assets separately. This is now required so that whichever spouse dies first can use their exemption leaving a second exemption available for the estate of the surviving spouse. If the exemptions were portable, then any exemption not used by the spouse dying first, would be added to the exemption of the surviving spouse.

Such a sea change in estate planning would allow all clients to simplify the estate tax overlay in their estate planning and would be a significant benefit for all clients. It would not eliminate the need for estate planning, but would greatly simplify planning for most clients.

Estate Planning Remains Relevant

Some people question whether estate planning is relevant, especially in view of the current state of the economy. I assure you it is. As I originally wrote back in the 1980’s, when economic times are slow, estate planning becomes even more important for the protection of our families. Back then, I wrote an article entitled, Estate Planning During Recessionary Times. This was published in several journals and the points raised there remain important today. Let’s discuss several of those points here.

The primary reason that clients pursue estate planning to protect themselves and their families. This may include protecting property and tax planning, however, the primary motivation is almost always family. Since this is usually the primary motivation, we normally seek to protect our families more when times are difficult. If you think about this, it is our natural response to being threatened. In this case we are discussing a financial threat caused by current economic circumstances. Put simply, when times are tough, we normally pull back and make sure that we and our families are safe and as secure as we can make them.

In order to be secure, we first protect against the downside risks that face us. The most difficult challenge we would face would be an untimely, near-term disability or death. This usually forms the basis of all estate planning—protecting against an unplanned disability or death in the near term. This is why estate planning forms the basis of all planning; more important than financial; retirement and investment planning. One of my mentors once taught me that your retirement planning requires you to live long enough to fund it and enjoy it. If a near-term occurs, the best made financial plan becomes totally irrelevant if not based on a sound estate plan.

In actuality, all these types of planning should work together. Estate planning is just the foundation that all other planning is built upon. This is why estate planning is relevant, even critical during difficult times.

Are You Prepared?

To conclude, ask yourself these questions:

1. Is my estate current?
2. Does my estate plan incorporate HIPAA provisions in the Powers of Attorney?
3. Is my estate planning flexible enough to deal with the changes coming in the estate tax exemption?
4. Has my estate plan been reviewed in the last 15 months?

If any of these questions receives a negative response, then it is time for an estate planning review. Don’t delay, when times are tough, like now, it is the best time to review your estate planning and make sure you and your family are properly protected.

As always, we thank you for your interest and support and encourage everyone to vote.

Rule 230 Disclosure

No portion of this message is intended to be used and cannot be used to evade any tax or penalty.

Greeting 2009

As the new year approaches, it is true that 2008 was challenging and also exciting. The economy continues to challenge and I will have additional thoughts soon about "chasing returns".

Hopefully the economic challenges didn't impact you too adversely. As I learned from my father many years ago, the market will always go up and down! The important question for us all is did we get too caught up and not protect ourselves properly?

2008 also brought us a historic election. Historic for the election to the presidency of Barak Obama. No matter where you may stand politically, Mr. Obama's election is certainly historic.

I have written earlier about what changes we may expect in estate planning from an Obama administration. So I will just take the time here to wish you and yours all the best for the coming year. As we wish for better things in 2009, may you also have health and happiness too.

Happy New Year!

Bernie Greenberg

Friday, December 19, 2008

Why Is It?

I am wondering this Friday before Christmas, why so few families, especially couples, ever begin and complete their estate planning.

It would seem that the vast majority of people do not take simple steps to protect their families and their property.

What are your thoughts about why so few people actually move forward with their estate planning? Is it because they are unaware of the benefits to their families? Or could something else be at work?

Let me know your thoughts.

Bernie Greenberg

Wednesday, December 17, 2008

Suspension of RMD Requirements?

Congress has passed and sent to the President for signature H.R. 7327, the Worker, Retiree and Employer Recovery Act of 2008, a bill that places a one year moratorium on required minimum distributions from Individual Retirement Accounts and defined contribution plans for 2009. Although the intent of the legislation is to give retirees an opportunity to recoup financial losses suffered in the last year, it may adversely affect some charitable IRA rollovers.

Editor's Note: Our initial reporting stated participants would be able to recontribute MRDs made in 2008 back into their plans. This was based on a press release from Senator Olympia J. Snowe's office (R-Maine) that PGDC Editors misconstrued as applying to the current bill.

Friday, December 12, 2008

Welcome to Our Blog

Welcome to our firm's blog. This is where we discuss items of interest in estate planning. We hope you will join in these discussions as your questions and comments spark our discussions and our work with clients.

Many people mistakenly believe that you have to be rich to need estate planning. Nothing could be further from the truth. The size of your estate may lead to certain suggestions and recommendations, but the only thing you need to need estate planning is to be alive.

Please let us know of your questions and specific interests.

Rule 230 Disclosure
Nothing that appears anywhere in our blog or messages is intended to be used, nor can it be used to evade any taxes or penalties.

Wednesday, December 10, 2008

Estate Planning 2009 & Beyond

With the election over, we know who our next President will be and the makeup of the next Congress. For estate planning we also know what has been promised by an Obama administration.

The federal estate tax exemption increases to $3,500,000 on January 1, 2009. President Elect Obama has endorsed this level for the federal estate exemption going forward.

Mr. Obama has also promised legislation making any exemption not used at the first death of a married couple available on the surviving spouse's death. If enacted this will make traditional marital deduction planning obsolete.

However, there remains a significant and acute need for appropriate planning even under an Obama estate tax administration. Protection of the surviving spouse and children; along with other family members will remain a focal point for your estate planning.

Higher exemptions and exemption portability do not eliminate the need for estate planning, but changes the focus in the planning process.

To learn how these changes impact your planning, please contact our office for more information.

Thank you.