Estate Planning

As reported in the Wall Street Journal, the Federal Estate Tax will likely expire on January 1rst. n1 Consumed by Health Care Reform, and in an unsurprising expression of absolute inaptitude, Congress recently failed to pass an extension of the Estate Tax. Consequently people should speak with their tax advisors regarding how they will be affected by the complex rules and growing uncertainty.
 

Don't assume that the repeal will be a tax benefit to your beneficiaries. The income tax consequences can be dramatic. Many beneficiaries could potentially save hundreds of thousands of dollars if the Estate Tax (under its 2009 form) is in effect. In many instances, the Estate Tax rules have provided for very favorable basis rules that have been a tax benefit to beneficiaries. 
 

Don't assume that the repeal will be a tax benefit for you. First, with proper planning an estate planning attorney can shield many millions of dollars from the Estate Tax. The result may be little to no actual Estate Tax liability. Second, the repeal is merely temporary. If Congress continues to do nothing, the Estate Tax will be reinstated in 2011. The reinstated Estate Tax would be much more expansive in scope. Consequently many more people would be subject to the Estate Tax. Third, Congress may pass retroactive Estate Tax legislation to capture Estate Taxes for decedents dying in 2010. If you die in 2010, without planning for the Estate Tax, and Congress passes retroactive legislation, then you may have inadvertently been snared in a tax trap. The result could be finacially devastating.
 

Don’t be lulled to sleep by the seemingly inevitable Estate Tax repeal. The rules will most certainly change, and future legislation is likely.  Don’t delay talking to your tax advisor because you are overwhelmed by the complex rules and uncertainty. It's very important that you consult an estate planning attorney. Contact us today and let a knowledgeable estate planning professional go to work for you.
 

Note:
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) was passed by the 107th Congress. Generally, the EGTRRA repeals the Estate and Generation Skipping Taxes (GST), for persons who, respectively, die or make GST transfers after December 31, 2009. However other particular rules apply (i.e. Qualified Domestic Trusts).
 
n1 The Wall Street Journal, Effort to Extend Estate Tax Fails: Levy Set To Expire Jan. 1, Setting Up A Political Standoff; Democrats Promise New Push, Authored by John D. McKinnon and Martin Vaughan, December 17 2009, http://online.wsj.com/article/SB126098351451293981.html

Authored by Luke Anthony Lenzi, Esquire  
 

The Virginia Supreme Court has determined that the term “issue” has a different meaning then similar terms, like “children”. Yet many people throw caution to the wind and rely on documents that use “issue”, “children”, “descendants”, “lineal descendants”, “heirs” and “heirs of the body”, either interchangeably or arbitrarily. All of the aforementioned words have specific meanings and, depending on the particular term used, the results can differ dramatically. 
 

Even less comforting, the date that the will or trust was executed has an effect on the meaning. A Virginia trust executed in 1976, with language devising property to the “issue” of a child, would likely have a different meaning if the trust were executed in 1980. Why? Because particular terms, like “issue”, have a common law meaning and sometimes state legislatures decide to abrogate that meaning. However rules of constructions may require that the will or trust terms be construed according to the law existing at the time of execution, rather than the current meaning.  But, then again, if that same Virginia trust were construed according to another state’s laws, the analysis may be completely different.
 

What does it all mean? Have an estate planning attorney create your documents. Estate planning is an enormously huge and complicated legal sphere.  Consult a competent attorney. Estate planning is not, and I repeat emphatically, not, a form driven exercise. Contact us today and let a knowledgeable estate planning attorney go to work for you.
 

Authored by Luke Anthony Lenzi, Esquire         
 

If you fail to dictate your medical and burial desires then you may be saddling your family with an awful burden. Failing to plan is tantamount to kicking the can down the road and passing the baton of responsibility to your family. Imagine the stress and emotional burden your loved ones would face if they were asked to determine whether you would have wanted life prolonging procedures? Do you want them to make the decision without your input? A potentially life or death decision that may implicate deeply rooted religious beliefs.

Virginia Code § 54.1-2983.3 provides that the absence of an advanced medical directive by an adult patient shall not give rise to any presumption for treatment. Consequently there is no presumption of life or death. The decision whether you live or die could be in the hands of a stranger, an estranged family member, or a group of family members. Many people are shocked to learn that Virginia Code § 54.1-2986 provides that an appointed guardian, not your spouse or child, has first priority to make the decision.

Failing to plan can be the catalyst for the breakdown of the family unit. It doesn’t matter if your family has a close loving relationship or a more tumultuous one. Every family is susceptible. You cannot guarantee that your family will stay together after you are gone. However you can reduce the risk that your family will stop speaking to one another because of a dispute about what treatment you would have wanted.

The costs of inaction can be astronomical. Informal disputes over your medical treatment can easily escalate into formal litigation. The result can be high court costs, attorneys’ fees, and expert witness fees. Additionally your beneficiaries’ inheritance can be exhausted on doctor and hospital bills that you never wanted to incur.

Your failure to act now can have devastating consequences later. But there is a simple and inexpensive solution. A properly drafted advanced medical directive, living will, or healthcare power of attorney can be the solution. Caution! These documents impact life and death decisions and they should be explained and drafted by a professional.

Careful planning can reduce unnecessary burdens and wasteful costs. It's very important that you consult an estate planning attorney during the drafting process. Contact us today and let a knowledgeable estate planning professional go to work for you.

Authored by Luke Anthony Lenzi, Esq.