Wednesday, July 27, 2011

Uncertainty and what it means for you

I have been receiving the same type of question from many clients lately. In each instance, the question centers around the activities of the government in spending more money than we have (and printing what it doesn't have!) and what that means for us on an ongoing basis. Every client of mine is aware of the current opportunity to use the five million dollar ($5,000,000.00) per person exemption to do advanced estate planning if the client's situation calls for it, but often in discussions the clients are nervous about whether this high exemption will continue to be in place for the rest of this year and next (currently set to reset to the one million dollar exemption level on 1/1/2013 unless congress acts to change the law before then). In upcoming blog posts we will be looking at some opportunities that high net worth individuals have by using the high exemption for this year, but my response to these clients who are nervous generally is always the same.

That response is that while the government has told us that we have the next two years to use this high exemption, I would not recommend that they wait until the end of 2012 to use the exemption if they need to do advanced planning. This is because it would be easy for the government to change the law for 2012 anytime before that calendar year starts (so think about a "compromise" at the end of this calendar year or anytime before then). If the government does change the exemption levels then people who would otherwise need to use the higher exemptions may not be able to do so if they wait until next year (especially since we do not know if any changes to these exemptions are on the table in any of these debt ceiling discussions). My recommendation to anyone reading this post is that you work with your existing planner NOW to determine if the exemption should be used this year in order to ensure that the planning can be done. When people allow the uncertainty to prevent them from doing the planning that they otherwise need to do, that leads to inaction and ultimately a poor or bad result for one's family. Do not let the media or the politicians convince you that it is sufficient to wait for "certainty" to happen. Create your own certainty by working with competent planners who can advise you on all of the issues that people are facing in today's world.

Teaching in the Fall

I'll be teaching Federal Income Taxation in the Fall Semester at Trinity law School. For any students reading this, we'll be going through many of the fundamental code sections that are important in this practice area and focusing on statutory interpretation (as we'll probably spend more time in the Internal Revenue Code than in the casebook). If any Trinity Student has any questions about what will be covered in the class, I will be submitting the syllabus this week and I will be available to discuss if you have further questions.

Wednesday, February 2, 2011

Highlighted Charity for February 2011

This month's featured charity is The Foundation for Hope and Innovation. Their website and other information can be found here:

They are a 501(c)(3) organization that was formed to do cancer research. They are passionate about doing everything that they can to fight this disease and do very good work. As their website states, their mission is:

"The Foundation of Hope and Innovation is dedicated to cancer research. We strive to improve treatment outcomes of those affected by the disease as well as foster awareness in the medical community and the general public. We are committed to providing hope through innovative approaches that promise to extend the lives of cancer patients and keep them cancer free longer."

As with all of the charities that I highlight in this Blog, I find them to be doing important work for society that will impact all of us (whether we get cancer in the future or a loved one or friend). If you have any questions about what they do or want to find out more, check out their website set forth above.

Saturday, January 29, 2011

2010 changes and how to plan in 2011 and 2012

The dust has now settled on the 2010 Tax Legislation called "The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010" which was passed in December of 2010. This act was passed just a few weeks prior to the so called "sunset" of the Bush tax cuts and has generally extended those cuts for two more years (until December 31, 2012). No matter where you are at on the political spectrum, this act has created some interesting planning opportunities that may, or may not, exist at the end of 2012 (depending on the results of that election). My goal is to place my other ongoing series of posts on hold and spend some time unpacking this tax act. There is much that needs to be discussed from the act, and I will start discussing the major areas that clients are asking about and that they should be asking about.

In no particular order, some of the topics that are of interest to my clients are: the addition of an election for decedent's estates dying in 2010 (either keeping the unlimited estate transfer with no step up in tax basis or the five million dollar exemption with the step up in tax basis), portability of a deceased spouse's unused exemption amount, the extension of income tax dividend and capital gain rates, and much more.

I will be discussing many of those topics in individual blog posts, but at this time note that if you have an estate over five million dollars (for a single individual) or over ten million dollars (for a married couple), this two year period may give you an unparalleled planning opportunity (especially if the election in 2012 creates a balance of power in the government that does not support the five million dollar exemption). Many of my high net worth clients that have taxable estates over the ten million dollar level are really looking at using the full ten million dollar gift to fund life insurance strategies, private annuity strategies, installment sale strategies, and many others. If you have been waiting to discuss proper planning until a more permanent law is passed into effect, then you may want to reconsider for this next two year period.

If you have any questions about your current estate planning or about what techniques can really work in this environment for the next two years, do not hesitate to contact me at 949-788-1819 or