Estate Tax Update

For those of you keeping abreast of the Estate Tax saga, this brief post provides a few links to information regarding the impending lapse of the Estate Tax, which appears will come to fruition. Some lawmakers, however, are determined to make sure that the expiration will not last for long. Until new legislation is enacted, you need to be aware of what will happen regarding the Estate Tax and Generation-Skipping Transfer Tax.

As we approach the New Year, the Estate-Tax-Expiration Watch will continue with great interest. As is typical of government, however, there is a high probability that no one will actually be allowed to leave this world without succumbing to some type of Estate Tax, as there is bound to be serious discussion on retroactivity of the new legislation. Stay tuned. . .

House Passes Amendment To Estate Tax Law

Yesterday, the U.S. House passed H.R. 4154 by a vote of 225-200. No republicans voted for this bill. As I expected would happen before year end, Congress is pushing for a continuance of the current $3.5 million federal estate tax exemption. H.R. 4154 extends the current exemption of $3.5 million per person indefinitely. If this bill becomes law, the current elimination of estate tax in 2010 and resurfacing of a $1 million estate tax exemption in 2011 will not occur.

For estates that exceed $3.5 million, the estate tax rate will be 45%. This means that for every dollar a deceased person's estate exceeds $3.5 million, the estate will owe $0.45 to the IRS. Also, H.R. 4145 does not include a provision related to portability of estate tax exemptions between spouses. This means that lawyers must continue to use flexible trust plans that create bypass trusts upon the first spouse's death to utilize both spouses' exemptions.

As we approach the reality of no estate tax in 2010, Congress is nearly certain to pass this legislation. I suspect the U.S. Senate will take up this bill quickly and send a final version to President Obama for signature. During his campaign, President Obama spoke of his support for a $3.5 million estate tax exemption and this bill aligns itself perfectly with his position.

By Michael W. Vogel

Password Please

Not long ago, in a world that now seems to have existed only in our memories, the safe-deposit box key was the only item clients had to make sure someone knew of to access secret or private information. Now, with assets and information locked away in various email accounts, social networking sites, and online bank accounts, clients must make plans for passing along passwords as part of their estate plans.

Whether your clients download from iTunes or tweet away on Twitter, someone must know the passwords to access accounts after your clients have passed away. Incorporating passwords into an estate plan should not be optional. As this post highlights, some online accounts may offer alternatives to access the account. However, there is no reason to force your client's loved ones to go through unnecessary hoops. Plan properly, plan thoroughly, and leave a legacy, not a mess.

Estate Tax laws may be changing again

In Washington, even in the midst of countless health care bill discussions, Congress is finally realizing that it may want to allocate some time to discussing estate tax laws. Over the last month, the House Ways and Means Committee has been discussing the topic of estate tax more regularly.

As is stands, the federal estate tax exemption is $3.5 million per person. If no changes are made to existing law, the estate tax will disappear in 2010 and reappear in 2011 with an exemption of $1 million. I don't think anyone is seriously thinking Congress will let current law simply take its course. Until recently, it seemed that Congress would impose a one year extension of the current $3.5 million exemption. However, new bi-partisan developments indicate that we may see new legislation that permanently fixes the existing estate tax enigma.

On October 22, 2009, House Ways and Means Committee members from Nevada, Texas, Alabama, and California introduced H.R. 3905 ("Estate Tax Relief Act of 2009"). This new proposal would keep the current $3.5 million exemption, but would increase the exemption by $150,000 and decrease the tax rate by 1% each year until 2019. Currently, the federal estate tax rate is 45% (i.e., for each dollar a person's estate exceeds the estate tax exemption, the estate is taxed $0.45). Under this proposal, in year 2019, the estate tax exemption would be $5 million and the tax rate would be reduced to 35%. The new proposal would also make the 2001 changes to the allocation of the Generation Skipping Transfer Tax exemption permanent.

H.R. 3905 is aggressive and likely will not be embraced by a full democratic House. Fortunately, Congress now seems to realize that the current state of estate tax laws cannot continue much longer. I still believe we will see a change to existing law passed by December 31, 2009. Unfortunately, due to Congress' obsession with health care discussions, we may only see a patch that continues the current exemption of $3.5 million into 2010.

By: Michael W. Vogel

Give Your Kids the Power Today

Watching a loved one battle with symptoms of dementia is a heart-wrenching process. Typically, a child must watch a parent slowly succumb to one of the diseases causing the dementia, usually Alzheimer's disease. As the child deals with the ravishes of the disease, stress is often magnified by the lack of ability for the child to easily make health care decisions for the parent. All too often, the parent procrastinated contacting a skilled estate planning lawyer to prepare for such an occasion.

If the parent had met with a skilled estate planning lawyer, a Power of Attorney for Health Care would have been created. The parent would have been taught that a Power of Attorney for Health Care is a vital piece of the estate plan that ensures the health care desires of the parent are carried out while the parent is living, but unable to make those decisions. The parent also would have been taught that without this advanced planning, if it was ever necessary for care to be given in a nursing home or community based residential facility setting that a guardianship would have to be obtained. This would add considerable stress to the person caring for the parent, not to mention the added financial burden.

Avoid the added stress of having to wade through the guardianship mire. Call your parents today and encourage them to make an appointment with a skilled estate planning attorney. Offer to drive them to the appointment if necessary. Urge your parents to plan while they are still legally competent to do so. Delaying this appointment runs the risk that adequate competence may be lacking, making the planning attempt moot. Parents, there is no need to leave this mess for your child to deal with. The costs to adequately plan now far outweigh the costs for a guardianship later. The peace of mind for yourself and your child that you have a plan in place is priceless. Contact us today to assist you with your planning. Leave your children a legacy, not a mess.

Planning Never Stops

Estate planning is crucial. Everyone has a plan. The $64,000 question is whether that plan is customized to carry out their wishes, or the plan will be determined by state law.

If you do not want your state's legislature determining who will be the recipient of your estate, your plan must be tailored to meet your wishes, and maintained. Even if you feel your estate is not large enough to necessitate a custom plan, remember that it is your legacy. You need to decide where it should go, not the government.

We all go through transitions in our lives. Each stage affects your estate plan. An article at Bankrate.com, titled 8 Life Stages for Estate Planning, outlines various stages your planning will go through, and provides some good food for thought. If you have never begun to plan, are entering a new stage in your life, or have an existing plan that needs review, make an appointment with one of Vogel Law Firm's competent, experienced estate planning attorneys today.

Estate Tax Update

As 2010 approaches, changes to the current estate tax will undoubtedly increase. It appears that both Republicans and Democrats are close with the proposals working through the legislature (other than the push to permanently repeal the estate tax). However, from this article, the debate over health care is monopolizing the lawmakers' time.

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To all of our readers, new and old, we thank you for following us and taking the time to read our blog. Our goal is to provide you with timely information, analysis, and opinions related to estate planning and probate. We encourage you to stay tuned.

To Deed or Not To Deed

For the last 15 years or so, adding the names of children to the deed to a parents' home has become commonplace. But, the fundamental question is whether this is a good idea legally. There is usually one reason that our clients want to deed their home to their children—they are afraid of nursing home costs and want to protect a valuable asset from being "taken" to pay for nursing home care. I don't blame anyone who has a healthy fear of nursing home costs. Depending upon the level of care needed, a nursing home will cost $6,000-$9,000 per month in the state of Wisconsin. OUCH! That's expensive and certainly creates some fear. To alleviate fear, a common suggestion from friends and many lawyers is to deed your real estate to your children to start the Medicaid five-year look-back period, but is this wise? We want to start the five-year look-back period, but should we really deed the house to the children?

Unfortunately, simply deeding your home or other real estate to your children is not a panacea. Yes, it will start the Medicaid five-year look-back clock ticking, but deeding property to your children comes with risk. Once the deed is done, your child or children now own a legal interest in your real estate. Often, you no longer own the real estate or you retain a life estate interest. The risk is your child's unknown financial future. If your child encounters debt issues, divorces, gets sued for money, or files bankruptcy, your home is placed in jeopardy. I recently assisted a client with the misery of paying a bankruptcy trustee a large sum of money to buy-back her daughter's interest in my client's home because her daughter's name was on the deed. This can be a nightmare!

What's the solution? People need lawyers who are creative thinkers. The solution is for a client to create an irrevocable trust to own the legal interest in your real estate that the client wants to give away. The client's children are the beneficiaries of the trust and the trust continues to exist until the client's death. If needed, the client may also continue to own a life estate (client keeps lifetime control) with the trust owning what is called a remainder interest in the real estate. Don't simply deed real estate to your children. You need greater protection. You need a properly drafted trust.

By: Michael W. Vogel

Give them peace of mind

In tough economic times, you may be tempted to put off estate planning because you view it as discretionary. Money is tight, so planning can be put on hold. Granted, choosing between buying food or creating a custom estate plan is not really a choice! Fortunately, even in these tough times, most people do not truly face that decision. Since you are reading this online (and haven't given up your DSL in exchange for survival), I will assume you are not one facing that decision, so please read on, this post is for you!

Death is inevitable. Failure to plan can add unnecessary stress and anxiety during a time when your family is already experiencing great pain and loss. A proper plan can assure that your wishes will be carried out, and it will provide a peaceful transition for your surviving family members.

If you have young children, planning cannot be put off. No one plans on dying and leaving their children behind. However, it does happen every day. When that unfortunate situation occurs, a guardian must be appointed by a court. This process takes time and money. If your plan names a guardian for your children, you can rest knowing that they will be taken care of as you desire. If you have no plan, your children are at the mercy of the court and your surviving relative. Even if you have a loving, close-knit family, leaving them with no plan to follow can leave the door ajar for contention and hurt as your family tries to decide who should care for your children. A plan will avoid unnecessary contention (which may prolong naming a guardian and be very costly – both emotionally and monetarily). A plan will provide you with peace of mind now. A plan will provide your surviving family with peace of mind that they are doing what you would want.

Even fame and fortune are no cure for the complacency that usually surrounds planning for death. If you recall former Tennessee Titan quarterback Steve McNair's death, he died without any plan in place. This forced his wife to deal with raising their children alone, as well as having to deal with the unnecessary headache of inheritance issues with children Steve had from a former relationship. With no guidance from a plan, Mrs. McNair is now forced to have the State of Tennessee dictate how Steve's estate should be distributed. A plan would have avoided this nightmare. A plan would have spelled out how the children (both from the marriage and from the other relationship) would have inherited. A plan would provide Mrs. McNair with peace of mind.

Death is inevitable. Tough economic times come and go. Proper planning now will ensure your plans – your legacy – will be carried out as you envision it now. Proper planning will give you and your family peace of mind, both now and after you are gone. Why wait? Your family deserves to be taken care of with a proper plan.