We've all heard the old adage that there is nothing more certain than death and taxes. Truer words have never been spoken, in my opinion.Back in 2001 when "Dub-Yah" was in office, Congress decided to gradually reduce the effect of the estate tax until 2009 when it would expire leaving 2010 with no estate tax at all. I am certain that many of our older and wealthier Americans would have, if they could have, planned their own "final exit from earthly bonds" to take advantage of zero estate tax. The plan was to bring the estate tax back to life in 2011 with a $1 million dollar exemption and a 55% tax rate.
In December 2010, Congress performed it's own "Miracle on 34th Street" by extending the estate tax retroactively to all estates in 2010. So much for planning to die conveniently in 2010.
The new law (for 2010 and 2011) allows $5 million to go to your heirs tax free and a 35% tax on the value of your estate that exceeds the $5 million.
One question entered my mind: What's likely to happen for 2012?
President Obama and the Congress will have to pay for the stimulus package(s) some how. The government has very few options. It's simple arithmetic really: increase revenue, decrease spending. Increasing revenue can only happen two ways: raise tax rates and or create new taxes. Neither one are particularly attractive especially when you're a Democratic President that wants a second term in office. Talk about the "kiss of death"!
To answer the question of what's likely to happen for 2012 and some salient advice on the need for all of us to do some estate planning, I turned to estate planning attorney Roberta Kuriloff of Ellsworth, Maine. Here's what she had to say:
7 Reasons Everyone Needs Estate Planning
- Do you have concerns should you become disabled?
- Do you have concerns about passing on core values to your beneficiaries?
- Do you have concerns that some of your beneficiaries could lose their inheritance because of creditor problems or divorce?
- Do you have concerns that some of your beneficiaries don’t have the ability to handle money, or are receiving government benefits that could be affected by an inheritance?
- Would you like to give your beneficiaries the same asset protection that is available to wealthy families?
If the answer to any of these questions is YES, please continue reading.
Congress has now passed estate tax reform. Each individual has a $5 million federal exemption from estate taxes. Maine has a $1 million exemption. But even if your estate is not taxable, the need for estate planning won’t be eliminated.
That’s because good estate planning is first and foremost a means to insure your goals and objectives for yourself and your family. Whether or not you have a taxable estate, you still need to plan for the possibility of your disability and to ensure that your property, however much you have, goes to the people and organizations YOU CHOOSE, in the most meaningful and cost-effective way. Let’s look at some planning techniques.
- Do you have a Financial Power of Attorney? If so, does the Power allow your agent to make gifts of your assets for continued estate and asset protection planning? If not, then if you become disabled your family will have to go to court to be appointed conservator over your estate. This is expensive, time consuming and not private.
- Do you have a Medical Power of Attorney? Having this document in place allows you to make the decisions about your care should you become disabled. Without it, your family will have to go to court to be appointed your guardian.
- Do you have a will? If you do not have a Will, even a simple one, the laws of intestacy will apply to your estate. This means that if you die leaving a spouse and children, the spouse gets the first $50,000 of your estate, and the balance is divided one-half to your spouse and one-half between your children! I’m sure this is not what you would want.
- Do you have children? Are you concerned that after you die your spouse will remarry and the new spouse will get your share of the joint estate, not your children? You can protect against this by setting up a trust in your Will that requires that your spouse sign a prenuptial agreement should he/she remarry.
- Do you have a child with special needs? If you do and you leave assets outright to the child, the child will lose his government benefits. If you leave the assets in a “special needs trust,” then the assets can be used to give your child a better quality of life without losing benefits.
- Do you have a home or vacation cottage that you want to remain in the family and not lose should you need care in a nursing home? If so, you can protect the property if you plan ahead before disability hits.
- Are you afraid that your child’s inheritance could be lost if she got divorced, or was sued? Well, if you plan like the parents of Ted Kennedy, that won’t happen. Ted had a trust set up by his parents. When he was sued by the estate of Mary Jo Kopechne, the estate could not invade his trust. When his previous wife sued for divorce, she didn’t get any of the trust assets. That’s because the assets were not his, but his parents, and they said the assets should be used for the beneficiaries’ health, education and maintenance, not to pay their creditors or non-beneficiaries!
As you can see, there’s a lot to think about, and a lot of meaningful planning you can do. Learn more and make informed decisions.
© Attorney Roberta S. Kuriloff
Roberta Kuriloff is an estate planning attorney located at:
20 Oak Street, Ellsworth, ME 04605, (207) 667-3107
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