As the 2010 holiday season descended upon America, Congress passed and President Obama signed an extension of the 2001 Bush tax cuts. The new tax law has many provisions that last until the 2012 election, but most significant for our purposes are the new estate tax and the new gift tax. The federal estate tax is now 35% on any estates over $5 million for a single person or $10 million for a married couple. The new gift tax is 50% of any gift to a person of over $13,000 per year with the lifetime exclusion (the maximum amount you can give to someone other than a spouse during your lifetime) now at $5 million from its prior $1 million threshold. Count on the 2001 Bush tax cut extension to be a big deal for President Obama and his Republican colleagues in 2012, especially with the economic cauldron of high unemployment, exploding deficits, promiscuous and unsustainable spending, a weakening dollar, states teetering on the edge of bankruptcy, and potential inflationary pressures, all boiling to a simmering storm of uncertainty and populist discontent.
Many estate planning attorneys, including many that I have talked with in the Kansas City area, find these new developments very troublesome. Won’t it eliminate our clients? Not many people have $5 or $10 million, the argument goes. Those that do already have relationships with private banks, investment firms, and noted law firms. Does anyone still need a trust? Or do we simply terminate trusts and execute new I-love-you wills that leave everything to the spouse and children? Won’t that kill our revenue streams from trust drafting and asset re-titling? Is it worth it to be an estate planning attorney any more? These are all good questions that need to be answered and I plan to answer soon in much more detail.
For now, let’s focus on what every client needs: (1) a will (2) a living will (3) a durable medical power of attorney and (4) a durable financial power of attorney. Anyone over the age of 18 who doesn’t have these legal instruments in place risks catastrophic consequences a la Terri Schiavo and Nancy Cruzan if they get in a car accident or die leaving student loan debt (or other secured debts, like a home mortgage) for their parents (buying life insurance to pay these debts off may be wise). If you are married or have children, the stakes are even higher – your spouse might have to probate your estate and get the Court to appoint them Guardian and Conservator of your child.
Maybe you’re an individual and figure you’re fine, you don’t drive a Ferrari or have millions of dollars, so you don’t need an estate plan, right? Wrong. An estate plan doesn’t need to be expensive or complicated, but you need one, whether you’re Bill Gates or Bob Jones the college student. Call (913-707-9220) or email me (firstname.lastname@example.org) if I can help.
(C) 2011, Stephen M. Johnson