Desert Estate Planning Law Blog : Palm Springs Estate Planning Lawyer & Attorney : Daryl Binkley Law Firm : Palm Desert, Indian Wells, Southern California

Well it is 2010, and the legislative branch balked on the issue of the estate tax for 2010.  So, as it stands 2010 is still an estate tax-free year--for NOW.  But, there is much talk that a law may be put in place that would be retroactive back to January 1, 2010.

Whatever the government decides to do with the estate tax issue this year, (or not), it will be interesting to watch.  Perhaps the only thing more interesting than how the estate tax issue plays out this year, is how it will play out in 2011.

An article posted on Forbes discusses how in some extreme cases, making gifts right now might be tax advantageous.  I think another practical issue regarding gifting strategies deals with the fact that some assets, particularly real estate, may be valued at very low levels, so if you do make a gift, given the reduced property values, your gift is of less value. 

Given the state of the economy, the unknown nature of the future of the estate tax, and whether the estate tax will be applied retroactively in 2010, any decisions in regards to gifting and estate planning should be analyzed in relation to the objectives of the parties involved.  What might be beneficial to do for one estate may not be beneficial for another--based upon the size of the estate and the basis in the estate's assets (that are considering to be gifted, for example).. 

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As I was browsing through various RSS feeds recently, a graph from Taxprof Blog and analysis by Tax Policy Center grabbed my my attention. According to their analysis: "In 2009, less than one-quarter of one percent of deaths—just 5,500 decedents—will leave taxable estates, the smallest percentage since at least the Great Depression."

Economic downturn, recession and a huge drop in real estate values in California (and elsewhere) have certainly affected the overall wealth of people--for so many, an estate tax might not be an issue of concern. In my own practice I have certainly seen that people are not as concerned about estate tax (as they were just a few years ago) but on top of their list of concerns is avoiding probate.
Probate is one the most common questions I get in my law practice. Click here to learn about essential things to know about probate.

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As we are approaching the last quarter of 2009 and 2010 is just a few months away, I expect to hear more and more comments about estate tax and its fate in 2010 and beyond. As I commented in my previous post , the estate tax is currently set to disappear in 2010 and then re-emerge in 2011 at pre-George W. Bush rates, with a 55% tax on the portion of an estate over $1 million.

Just today, in WSJ, Jonathan Weisman wrote an article entitled "Estate Tax Faces Its Own Life-and-Death Struggle", highlighting how the current political climate and political parties might be dealing with a tax set to disappear in 2010 and the expectation of additional tax law changes in 2011.

As mentioned in the article, the debate over healthcare has pushed discussions about estate tax issue to a second tier level, but what I found interesting is that central players on the estate-tax policy also have key roles in the healthcare debate. As it stands now, President Obama has proposed permanently locking in the estate tax at the current 45% with a $3.5 million exclusion but some might worry (as stated in the article) that some politicians might block any action in 2010 to ensure the tax will return in 2011 at the 55% rate with a $1 million exclusion. 

Also the stock market fluctuations and deep declines in real estate values may let politicians have a different view on where to tax estates since a dollar today arguably goes further (at least in reference to real estate) then it did a couple of years ago.

So how might all this affect you, if the laws remain unchanged:

·         In 2011, more estates will have to pay the estate tax since the exclusion drops from $3.5 million to $1 million.

I am sure we will hear more about this issue, so stay tuned…

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I got into estate planning law after experiencing first-hand (with family and friends) what can happen to an inheritance without proper estate planning. Homes are sold at fire-sale prices to pay for estate taxes, family assets get tied up in endless probates, and all that accumulated wealth people worked so hard to build begins to disappear--all because there was either inadequate or no planning in place.  And in most cases a lot of that headache and stress would have been avoided with some proper planning and knowledge of law.

So if many people don't know how to do this the right way, then at least the high-net worth family owned businesses in America--they must know and certainly do proper planning, right?

Well apparently not.  An article in Conde Nest Portfolio cites "a recent study of 242 family businesses owned by ultra high-net-worth individuals commissioned by U.S. Trust, Bank of America Private Wealth Management shows that despite professing dedication to preserving wealth, these companies are not doing the planning--estate, succession, asset protection--to achieve it."

"Only 15 percent of the companies studied stay under the control of their founding families past the second generation" ONLY 15 PERCENT.  Another interesting point in the article that exemplifies the idea: "Do as I say not as I do" is that "Two-thirds of these uber-rich business owners want to keep it in the family and have a succession plan.  Only one-third of those plans are being implemented, and most of them are out of date." If they are out of date, then they might fail, quite spectacularly too.  Russ Alan Prince a co-author of the study is quoted as follows:  "They're too busy making money to protect the money they're making."

The reality is that laws are tricky and many people are scared to ask lawyers what to do. Sometimes they are scared of the price an attorney might ask. In reality, many attorneys will offer a free consultation, review your situation and give you options. And the price of estate planning work needed (before problems occur) is generally a fraction of what probate and estate taxes might be (for those that have estate tax issues). Sometimes people are not even aware of any tax implications, and if you don't know what you don't know, how can you even ask the right questions?

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HAL could there really be no estate taxes in 2010???

As it stands right now, the Estate Tax is scheduled to take a complete break in 2010, meaning there will be no estate taxes charged to any estate of people that die that year.  

Of course 2010 hasn't occurred yet, but it will be an interesting experiment if it remains a death-tax-free year. 

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