Written by: Attorney, Kevin G. Wick

There exists a great deal of buzz in the legal and financial communities regarding the impact of recent legislation on estate planning. A good deal has changed, yet the long-standing, tried and true reasons for having a current, well-drafted estate plan in place still remain. I’ll address both principles below.


Important Changes for 2011


On December 17, 2010, the federal Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “2010 Tax Act”) was signed into law. The 2010 Tax Act extended the so-called “Bush tax cuts” for two years and made significant (if only short term) modifications to the estate and gift tax system.


Highlights of some of the changes include:

  • An increase in the estate tax exemption to $5 million for 2011 and 2012.
  • An increase in the gift tax exemption to $5 million for 2011 and 2012.
  • A reduction in the estate and gift tax rates to 35% for 2011 and 2012.
  • A reunification of the estate and gift tax exemptions so that an individual can give away during life or at death up to $5 million for 2011 and 2012.
  • Introduction of the concept of “portability,” permitting the estate of the second spouse to die to take advantage of the unused $5 million tax exemption of the first spouse to die for 2011 and 2012.
  • An option to apply the $5 million estate tax exemption retroactively for estates of 2010 decedents.


These significant tax changes provide unique (but perhaps one-time) planning opportunities for those with large estates. In particular, the $5 million gift tax exemption allows for consideration of a wide variety of gifting options that can move assets that may have depreciated in today’s market to a future generation, taking the present value along with all future appreciation out of one’s estate, potentially saving millions in taxes down the road.


However, the provisions of the 2010 Tax Act expire on December 31, 2012. Without further action by Congress before that time, the estate and gift tax exemptions will fall to $1 million beginning January 1, 2013, depriving many of a valuable planning opportunity, and subjecting many, many more individuals and families to the onerous estate tax in 2013. The message, therefore, is simple – call Davis Miles and begin addressing your estate planning today!


Beyond the effects of this recent federal legislation, many familiar reasons remain for preparing and maintaining a current, well-drafted estate plan:


Keeping Control


Only a current, well-drafted estate plan can insure that your wishes are carried out, both in the event of incapacity and upon death. Many clients seek the advice of an estate planning attorney after personally experiencing, or seeing a close friend experience a significant waste of time and money due to a loved one’s failure to make an estate plan. Choosing the individual(s) to be in charge if you become mentally incapacitated and after upon death and deciding who will get what, when they will get it, and how they will get it after you’re gone is a sure fire way to avoid family fights and costly, drawn out court proceedings.


Avoiding Probate


Avoiding probate is perhaps the most common reason why people seek out the advice of an estate planning attorney. Whether they’ve had first hand experience or never even dealt with probate, they still know one thing – they want to avoid it at all costs. This stems from probate horror stories covered by the media (i.e. the recent series in the Arizona Republic) or told by neighbors and friends. To put it simply, for the vast majority of people, avoiding probate is by itself a sufficient reason for creating an estate plan and can be easily achieved.


Protecting Your Beneficiaries


Another major reason people need to put together an estate plan is to protect their beneficiaries. That can include protecting minor beneficiaries, protecting special needs beneficiaries, and protecting adult beneficiaries from poor decisions, spendthrift tendencies, outside influences, creditor issues and even divorcing spouses. If the beneficiary is a minor, proper planning is needed to avoid the court appointment of a guardian or conservator to oversee the minor’s needs and finances until the minor reaches the age of majority. Prevent family discord and costly legal expenses by taking the time now to designate a guardian and trustee for your minor beneficiaries. If the beneficiary is already an adult, then your estate plan can protect the beneficiary (and your hard earned assets) from their own bad decisions and even their own creditors.


Protecting Your Assets from Unforeseen Creditors


Asset protection planning remains a very important reason why many people, including those who already have an estate plan, need to meet with their estate planning attorney. Once you know or even just suspect that a lawsuit is on the horizon, it’s usually too late to put a plan in place to protect your assets. It is critical to start with a sound financial plan in conjunction with a comprehensive estate plan that can help protect your assets for the benefit of both you during your lifetime and your beneficiaries after your death.


Please contact me to schedule a personal review of your estate planning needs today!