When All You Have is a Hammer

I started practicing in 2000, back then people who were just hard working middle class but who were big savers were learning that saving all that money only meant they were going to give a chunk of it to the government when they passed.  The Estate Tax kicked in on individuals at $675,000 and a married couple at $1,350,000.  Estate planning attorneys everywhere put everybody in the same Marital Trusts with an A/B split.   Those folks who had succeeded and done all the right things  would come out of a meeting with a lawyer all of a sudden learning that when they died there were going to be two trusts with different rules and tax consequences.  No matter how many boxes and arrows the attorney drew it did not make it any clearer.  It looked all Rube Goldberg: like a contraption from a Tom & Jerry cartoon.  Estate planning attorneys put everyone in the same plans with the same trusts, because they knew it worked.  It was all about avoiding the estate tax.  No great amount of thought was given to the individuals who were to inherit and what their circumstances were like.  The planners had one plan for almost everyone, and when all you have is a hammer everything looks like a nail.

In 2015 the exemption amount is almost $5,500,000 for an individual and $11,000,000 for a couple.  The IRS estimates that 99.8% of estates have no exposure to the estate tax.  Because of that people can now pass on very large amounts without having to consider the tax man.  Today people have the luxury to decide with care and precision what their wishes are for their children.  It may not be in the best interest to drop $4 million to a son who has failed to hold a job, or perhaps to the daughter whose husband seems to stay in the crosshairs of the IRS.  Now estate planners can design a plan that reassures the client that the money they worked for and saved will be a benefit for their children and grandchildren, and that it will be there for their care.  Attorneys can draft documents that treat the children differently according to their needs and talents (and deficits).  Monies can be paid out over time, in percentages when they reach certain ages; portions can skip and pay for grandchildren’s educations and medical care; budgets required for distributions; there is simply no end to the various plans that can be devised.  Instead of that one hammer and nail, we can use all the tools and equipment to make what you want and need.

The raised exemption for the estate tax has not made it easier for estate planning.  It requires consideration and thought as to what your wishes are and how you want to make sure that your children succeed with what you leave them.  No, not even after death, you never stop raising them.

If our law firm may help you fully understand Estate Planning or Estate Tax, please just give us a call.