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.