U.S. Senate Declares War on Small Estates! How to Arm Your Estate Plan and Fight Back

On July 25, 2012 the U.S. Senate declared war on your estate. Here's how your estate plan can fight back!

In a shocking political move on July 25, 2012 the U.S. Senate fired the first volley in a political war on federal taxes. The Senate passed a bill (which has little, if any, hope of passage in Congress) extending for one year several income tax benefits for most Americans. High income earners see significantly higher income taxes under this bill.

However, the bill does not extend the existing $5 million estate tax exemption. Instead, in a move that should strike fear in your estate planning, the bill returns all federal transfer tax (estate; gift; and generation skipping) exemptions to the 2003 level of only $1 million. While this number sounds high it is actually alarmingly low.

The federal estate exemption stood at a mere $600,000 in 1987. In 2012 dollars, that would equal a little over $4.7 million. So the 2012 exemption of $5 million only keeps pace with the 1987 exemption. The Senate bill turns the estate planning world upside down by redefining wealth in the U.S. Now the Senate has targeted small and middle class estates for the largest tax hike in history.

Now it is doubtful that the Senate's bill will become law. First, it is a slap in the face of President Obama, who asked for a bill setting the estate tax exemption at $3.5 million, it's level in 2009. Second, such an assault on middle class families is not only politically unwise in an election year, it is widely viewed as political grandstanding.

Nevertheless, this bill is out there and if it did become law, represents a major strike against your family and your property. So how do you protect yourself and make sure your estate plan is properly armed against this attack? Here are 3 simple steps to follow:

1. Review your estate plan immediately with your estate planning attorney.

2. If you don't have an estate plan, it's now time to do your plan. Learn how this bill affects you and your family and what your options are.

3. Act quickly. Several options and strategies require both spouses to be alive to take advantage of the current exemption rules. This means you should approach completing our estate plan with urgency.

We watch the progress of this bill as it attempts to wind it's way through Congress. With the election season upon us you will hear much about this in the coming days. To find out how this bill may affect you and your family, please let me know.

Bernie Greenberg

Is the End of the Year the End of Estate Planning as We Know it? Is the End of Your Estate Plan?

Is the end of the year the end of estate planning? Is this the end of your estate plan? Maybe!

The end of 2012 will bring huge changes to the world of estate planning. Unless the Congress and President act, three central foundations of estate planning will drastically change, and the change for you is all bad. How does this affect your estate plan? Maybe not at all and maybe it is the end for your plan. Read on to learn more.

The End of Estate Planning As We Know It? Probably Not.

First, let's review what happens at the end of the year. The three major tax exemptions used in estate planning, estate tax, gift tax and generation skipping transfer tax all revert from $5 million to only $1 million starting January 1, 2013. Much of what we do in estate planning is built on these three exemptions.

However, I don't think it is the end of estate planning as we know it. Since we don't let the tax tail wag the family dog, what this will mean is that millions more will be doing more complex estate plans since the exemptions will be significantly lower. So for us estate planning lawyers that will be good! For the clients,not so much. We will still do estate plans for the same reasons as before: to protect our clients, their families and their property. But starting in 2013, millions who had no estate, gift or generation skipping tax concerns will now have them--in spades.

The End of Your Plan? Perhaps!

If you didn't do estate tax planning previously because your estate was less than $5 million, you may have to do so now. If you had a plan that used your estate tax exemptions, it just won't work as well for your family with the much lower exemptions starting in 2013.

What should you do? Have your plan reviewed immediately. Next, write your Congressional representatives and Senators and tell them how you feel about this. Maybe your voice will make a difference. We recommend to all of our clients to not depend on politicians to solve your families' estate plan issues. Don't do it now.

And maybe, just maybe, Congress and the President will come to their respective senses and fix this with some finality and permanency so you can have some certainty knowing that your estate plan will operate the way that it is supposed to. But don't count on it!

what are your thoughts? Please join our conversation on estate planning and these issues. I look forward to hearing from you.

Bernie Greenberg