Estate Planning

Estate planning (preparing a Last Will and Testament, power of attorney forms, trusts, etc.) is one of those things we know we should take care of, but we just procrastinate or one party in a couple just does not want to discuss it.

When we finally do our estate planning, it is for many reasons but primarily we are concerned that what we have worked a lifetime to accumulate will be saved or will stay with our family members.

Estate planning means different things to different people and it should, because a good estate plan reflects the uniqueness of the person creating it. In its broadest sense, estate planning covers the process of accumulating, managing and distributing property over the course of a lifetime. It is a process of integrating personal financial goals with provisions for others who will survive us.

Experts speculate about what changes Congress will make to the current Federal estate tax law, and unfortunately, we don’t have a crystal ball to predict what they will do. Will they make the law retroactive to the beginning of 2010? Nobody knows. What we do know is that since 2001, the estate tax ranged from between 45 and 55%, and this year there is none. We also know that the amount excluded from taxation has ranged between $1 and 3.5 million, and this year it is zero. And finally we know that in 2011, the exemption goes back to $1 million, and the top tax rate will be 55%.

With these facts in mind, now would be a very good time for those who have previously completed their estate planning documents to review them with their attorney. Some documents, for example, may state that assets in excess of the estate tax exemption will pass to a marital trust. The other portion, the amount of the exemption, may either go to a credit shelter trust for the benefit of the surviving spouse, or to surviving children. The problem lies in the fact that since no federal estate tax exists in 2010, all assets may go to the credit shelter portion and the marital portion would get nothing, depending on the wording in the documents.

In another scenario, what if your documents were set up so that the children from a previous marriage were listed as the beneficiaries of the credit shelter portion? In that case, the current, surviving spouse would get nothing. This may not be what the couple had planned in advance. The upcoming changes in estate tax law make it imperative for people to review their estate planning documents to ensure that their wishes will actually be carried out as they intend. If a change needs to be made, it may be as simple as having a codicil prepared or an amendment added so that these complications will be eliminated.