Just a Little Conversation…

Americans just do not like to discuss estate planning. Supposedly 7 out of 10 of us have no plan. Of the 3 who do, what are the chances that the plan is up to date?

A friend of mine, Michael Stuart, just sent me this link to an article in the NY Times talking about talking. I wanted to share it with you as it paints the picture of what happens with no plan, and even how to open a conversation about one.

http://www.nytimes.com/2010/03/04/business/04ESTATE.html?emc=eta1

When I think about the plans that I have helped clients create, many stories come to mind. One recurring theme is a senior couple who own some investments and real property, with one of their adult children serving full-time as a caretaker. Other kids are not too involved in things… and the caretaker daughter pretty much has her hands full with children of her own and helping out the folks. In this situation, the adult daughter has a full time job or two already… and no outside means of support.

Many parents want to treat children "equally." But what do you do when there is only so much to go around, and the cost to one kid (the helper) is simply going to be too high for that to even remotely be fair? Parents must first plan for their care, then consider being "fair" rather than "equal" to those who follow.

It's often the right thing to do… but without some conversation, and openness, it will likely have a huge cost in terms of relationships down the line. And ignoring this dynamic is unlikely to provide a better result.

TAKING A POSITIVE STEP

If you really get stressed about estate or retirement planning, why not relax and yet learn about both? Here are some timeless movie picks:

 

It's A Wonderful Life Do you ever wonder if you "matter?" Can one person make a significant difference in this life? Jimmy Stewart finds out in this holiday classic.

Brewster's Millions What happens when you inherit $300 million from the uncle you never knew? Richard Pryor finds out in this hilarious "spend it ($30 million in 30 days) or lose it" comedy.

Little Big League A grandson inherits the Minnesota Twins from his grandfather. This one's a hoot.

Tuesdays With Morrie Jack Lemmon is a retired college professor with Lou Gehrig's disease, spending each Tuesday passing on life's lessons to a former student.

Sense & Sensibility A father leaves his estate to his son and tells him to "take care of my other family too." How hard could it be to determine what four women need to live on? One woman sets up her estate to discourage a behavior, but then gets the opposite result. The law of unintended consequences prevails…

Body Heat William Hurt drafts a Will containing a technical flaw which causes it to fail… Bet you can't wait to see how this one works out.

Changing Lanes A "simple" power of appointment (by which you allow someone to tinker with your estate plan) proves to be a devastating tool in the wrong hands. Such a power is used here to disinherit underprivileged children in New York.

On Death and Taxes

My mom passed away last night. Although expected, it was still a shock to the emotional system. At times like this I take great comfort in her pride in me that I became an attorney. She enjoyed our discussions about right, wrong, and WHY we Americans do what we do as a society. In memory of my mom, I want to share some thoughts on wealth transfer taxation.

Perhaps nothing so incites many people as the thought of paying a "death tax." Some folks are for it. I think about taxation on the transfer of wealth pretty often, because while I believe in providing money for government to do its job, I also espouse the notion of free will and the ability for each of us to move capital freely and as we see fit.

Two close friends and great conceptual thinkers, Bob Keebler, CPA and Jonathan Mintz, J.D., directed me to a very interesting paper from the IRS titled Federal Taxation of Inheritance and Wealth Transfers. It's available online at http://www.irs.gov/pub/irs-soi/inhwlttr.pdf.

This thoughtful study, written in 1997, discusses the advantages and disadvantages of an increased scope of transfer taxes and presents the history of thinking about such since the formation of our country. Here is an abstract:

"For most of the 20th century and at key points throughout American history, the Federal government has relied on estate and inheritance taxes as sources of funding. Central to both historic and current debate over the role of inheritance in democratic society is the divergent characterization of inheritance as either a "right" or a "privilege." This paper provides an understanding of these arguments and of the history surrounding the development of the modern American transfer tax system, as well as a foundation for evaluating current debates and proposals for changes to that system."

Note that this article comes from the Statistics of Income (SOI) Division of the IRS; they have very interesting statistics about estate and gift taxes, among other things, at http://www.irs.gov/taxstats/index.html.