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Estate tax ‘repeal’ directly affects married couples
“If you keep thinking about what you want to do or what you hope will happen, you don’t do it, and it won’t happen.”
- Desiderius Erasmus
If you’ve been paying attention to the news for very long, you’ve no doubt heard that the estate tax has been “repealed” for 2010.
You may even have seen stories like this: http://bit.ly/8GlqAM (A man who died thirteen hours “too soon”–costing his estate about $3 million).
Well, aside from families like that, this repeal is good news for the 6,000 or so families which it truly affects. But for the rest of us…
It’s not all rosy.
Read on to hear what I mean…
“Straight Talk” Personal Strategy
Married Couples Affected By New Estate Environment
Because of a Congressional failure to act before the end of 2009, there’s good news and bad news to report on the Estate Planning front.
The good news is there’s no Estate Tax if you die this year. The bad news is, that you may owe significant capital gains taxes if a loved one dies this year and leaves you significant appreciated assets. If you have total assets of around $1 million or more (including face value of life insurance, retirement plans, home equity, etc.) you should make sure their estate plan is up to date.
Congress has had nine years to prevent this from happening, but has failed to act.
Under the provisions of a Bush-era tax-cut bill enacted in 2001, the estate tax exemption has been gradually raised over the past eight years, while the tax rate on estates has been reduced.
For estates of those dying in 2009, only assets worth $3.5 million or more were subject to estate taxes, at a rate of 45 percent. But now, for the year 2010, the estate tax has disappeared entirely, only to be restored in 2011 at a rate of 55 percent on estates of $1 million or more, which is exactly where things stood before the 2001 change.
Many Couples At Risk
The new world of “no estate tax” places at particular risk certain couples who have built in “Credit Shelter” trust provisions (also called “Bypass Trust” or “Family Trust” provisions), which are designed to allow both spouses to take advantage of their estate tax exemptions.
These are common arrangements used in estate planning for married couples. With the estate tax gone, one possible problem is that the wording of some of these trusts could cause all assets to completely bypass the surviving spouse when the first spouse dies. This could mean that a surviving spouse might get nothing without the expensive process of claiming her “elective share.” For a more detailed explanation of this potential problem, see this blog posting:
Everyone — Especially Married Couples — Should Have Their Estate Planning Reviewed ASAP.
Because of these tax changes, a review of your existing estate planning documents is essential.
And, of course, we’re here to help. Give us a call this week.
Still reeling about Haiti
He who loses wealth loses much; he who loses a friend loses more; but he that loses his courage loses all.
- Miguel De Cervantes
I’ve been deeply affected by what happened in Haiti last week. It’s shocking, painful and the worst part of it all is how uncertain that nation’s future will remain to be for some time.
How have you been processing that event? Part of what often makes us all numb to these disasters is that “daily life” must go on. So there’s a natural disconnect. Here I am watching images of severe devastation–there I am grabbing a caramel latte with a double shot of espresso.
(As an aside, I’d be interested to find out if you have located an effective place to send donations–the big organizations spend so much money on “overhead”, that I find it difficult to believe I’d get the most “bang for my buck”. Any thoughts?)
And, while the scope of the tragedy is very different, “mopping up” after a family tragedy can be just as devastating.
Which is why, simply put, it pays to be prepared.
Yes, there have been significant estate tax changes this year–but did you know that estate planning is *much* more than just avoiding the “estate tax”?
In fact, the great majority of our clients aren’t in the wealth category affected by the estate tax legislation (which I’ll address next week). They’re with us to avoid all of the pain and inconvenience of going through the probate process, as well as ensuring that *every* aspect of their wishes are handled properly.
So, this week only, I am making a special offer to my email contacts:
Set an appointment for us to review (or set-up) your estate plan, and you will receive a $100 gift certificate to the restaurant of your choice OR we will make a $100 donation in your name to a reliable charity serving the victims of the Haiti earthquake.
Yes, all you need to do is make the appointment, and we’ll hand you your certificate or cut the check when you finish your appointment. No strings.
But you must contact us this week in order to take advantage of this special opportunity.
Call us or send an email back to us, and we’ll take care of your planning needs.
Jimi Hendrix, Flo-Jo, Princess Di…and you
“The whole idea of motivation is a trap. Forget motivation. Just do it. Exercise, lose weight, test your blood sugar, or whatever. Do it without motivation. And then, guess what? After you start doing the thing, that’s when the motivation comes and makes it easy for you to keep on doing it.”
- John C. Maxwell
Well, let me begin by noting that I’m not trying to frighten you. Yes, the people I mentioned in that subject line have passed on to a different place. I’m not suggesting you’re next!
No, what’s interesting about these celebrities is that each one of them made some major mistakes in their planning BEFORE tragedy struck…and it cost their loved ones dearly.
And, I thought you’d be interested to learn some of these “behind the celebrity” stories I ran across. They’re from a new book called Trial & Heirs by Andrew Mayoras, a probate litigator, and they make for interesting reading!
Let me know your thoughts!
“Straight Talk” Personal Strategy
Estate Planning Mistakes of the Rich & Famous
Florence “FloJo” Griffith Joyner
Mistake: Not telling your executor where to find your original documents.
When Olympic sprinter Florence Griffith Joyner died at 38, in 1998, her husband couldn’t find her original will, and failed to file it with the probate court within 30 days of her death, as required by California law. Joyner’s husband and mother took disputes, including whether Joyner promised her mother could live in their house the rest of her life, to court. Joyner never filed the original will, and the judge eventually appointed a third party to administer the estate.
Your Lesson: Make sure at least two people you trust know where to find your original will. To be safe, keep two copies, and leave the original in your bank safety deposit box, or in a safe here at our offices.
Doris Duke
Mistake: Bad choice of executor.
Tobacco heiress Doris Duke, who died in 1993 with a fortune estimated at $1.3 billion, named her butler as executor and as trustee for a huge charitable foundation. After the butler’s lifestyle and spending habits were called into question, he was removed from his duties by a probate judge, then reinstated by New York’s highest court. A settlement agreement created a board of trustees to manage the foundation.
Your Lesson: Don’t have the butler do it. Pick someone competent and trustworthy as your executor. And, of course, we can help you with that!
Princess Diana
Mistake: Relying on a “letter of wishes” to give away belongings.
After her tragic death in 1997, Princess Diana left a detailed will–naming her sister and mother as executors. She also wrote a separate “letter of wishes” asking her executors, at their discretion, to divide her belongings among her sons and her 17 godchildren. But instead of getting stuff worth an estimated 100,000 pounds, each godchild got only a trinket.
Your Lesson: Don’t rely on executors’ sense of duty; put bequests in your will or trust or in a signed, dated list.
Jimi Hendrix
Mistake: Never writing a will.
Music legend Jimi Hendrix (one of my favorites when I was younger) died at age 27 in 1970 without a will. Under state law, his dad, Al, got everything, leaving his close brother Leon with nothing. Al built Hendrix’s musical legacy into an $80 million venture, but, in his own will, he cut out Leon and his family, in favor of his daughter through a later marriage.
Your Lesson: Even young rock stars aren’t immortal. Sign a will or living trust document.
Ted Williams
Mistake: Conflicting directions on burial wishes.
In his will, baseball legend Ted Williams said he wished to be cremated. But his two children from a second marriage produced a grease-stained note saying he wished to be put in “biostasis” after his death, and they froze his body after his death in 2002. It’s become a bit of a macabre joke in the sports community, unfortunately. His eldest daughter fought to have his body unfrozen and cremated, but gave up the fight when she ran out of money.
Your Lesson: If you change your mind about your burial wishes, change your will by adding a codicil, or writing a new one.
I hope these stories help you avoid becoming a celebrity cautionary tale! To your family’s financial and emotional peace…
Break the chains of debt
“I was thinking one day and I realized that if I just had somebody behind me all the way to motivate me I could make a big difference. Nobody came along like that so I just became that person for myself.”
- Unknown
Well, it’s the week after the new year, so I thought I would just touch base with a simple note of “thanks”. As we move into the new year, I want you to know that we deeply appreciate your trust, and are honored by the opportunity to help you realize your dreams. We understand that money is the fuel for those dreams–and not their fruition. Which is why we work so hard to help you preserve your assets for generations…so your REAL dreams can come true.
Sure, it may seem a bit lofty for a lawyer, like me…but it’s how we remember that every dollar and cent matters. Your dreams are important, and worth protecting–zealously. So again…thanks for letting us help.
Moving on… after the holidays, the bills come in, and sometimes regular families are staring at some debt.
Well, I further want you to know that we do NOT “judge” you for the decisions you’ve had to make during these tough times. Simply…we’d just like to walk alongside you, and help you out. That’s why I’ve put together some strategies for beating back that debt.
Send me your thoughts!
“Straight Talk” Personal Strategy
Simple Strategy To Break Debt Off Your Back
First, some sobering numbers–and they may be worse now: by the end of 2008, the average credit card balance per household in America was $8,329 and the average balance per card was up 11 percent over the previous year to $1,157.
You may be in a better situation…it may also be worse. So, to help regular families deal with this, here’s some basic strategy for you:
1. If you ever hope to pay off your credit card debt, pay more than the minimum payment each month.
If you only pay the minimum payment each month, your bill could continue to INCREASE, even if you completely stop using your card. This is called “negative amortization”–where you think you are paying on your debt but the additional fees and finance charges are more than the minimum payment. The bottom line is: Pay more than your minimum or you will eventually be in debt over your head.
2. Implement a regular *system* for credit card debt reduction.
With online banking and automatic payment options, there are GREAT tools for ensuring you don’t mess up because of administrative chaos. If you feel you can’t manage all your bills by pen and paper, there are several good software programs available for keeping track of your financial records.
3. You can negotiate with your credit card company.
No, you do not need to be an attorney or other professional to negotiate with your credit card company (you will need patience and persistency though). The rising amount of consumer debt in this country has made creditors realize that they need to be more understanding of their customers — if they hope to get any money back. If you file bankruptcy they are only going to get pennies on the dollar, so they are willing to make deals.
4. Write letters to each of your creditors acknowledging your debt and the situation, and tell each one when you can begin repayment.
Open communication always helps. Usually credit card companies get ignored and end up sending delinquent files to a collections agency. So they’ll actually appreciate your openness in contacting them and may be more understanding of your situation. Proactively dealing with your debt problem rather than hiding will not only help your financial problem but make you feel better about yourself.
5. Keep track of what you are able to pay each creditor every month.
If you are not able to pay the full amount of your credit each month, you still should still pay something to stay on top of it. You should work off a written budget so you know exactly where you stand. Some experts suggest that you divide your monthly debt budget by the percentage each bill makes of the total and pay that amount.
Here’s an example: If you owe a total of $1,000, and one credit card is $800 and the other is $200, and you only have $100 available to pay for that month… You should pay $80 on the $800 balance, and $20 on the $200 balance. This way you are reducing each debt by the same percentage.
6. Don’t fall prey to intimidation tactics
No matter how forthcoming and honest you are, some creditors have been taught to be mean and downright nasty. Hang in there and don’t let this tactic intimidate you.
I hope this helps!
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