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Your Estate Planning Checkup

April 28, 2008 Articles Trusts & Estates

“Nothing is certain but death and taxes.” In 1789, Ben Franklin wrote this in Poor Richard’s Almanack.

In 1936, Margaret Mitchell put a different spin on it in Gone With The Wind: “Death, taxes and childbirth! There’s never any convenient time for any of them.”

In 2008, both sayings still ring true. The possibility that there will be taxes this year (and the next and the next) is an inconvenient certainty. However, the amount and timing of taxes, well, that is another story. Here are some big uncertainties and inconveniences:

  • In 2008, the federal estate tax exemption amount is $2,000,000. That exemption amount will rise to $3,500,000 in 2009 – for one year. What will Congress do in 2010 and thereafter? Allow the exemption amount to sunset back to $1,000,000, keep it at $3,500,000, or increase it?
  • The estate tax rates for 2008 top out at 45%. In a taxable estate, this generally means that for every $100,000 over $2,000,000, estate taxes of $45,000 will be due. Estate taxes are the highest of all taxes and become payable in full upon death. Will Congress increase those estate tax rates in 2010?
  • Property values are dropping in 2008. What will happen next year?
  • Interest rates are low. How long will they stay that way?

While you are waiting for Congress to act, waiting for a new President, waiting for the economy to get back on its feet, or waiting for football season to begin, what should you be doing with your estate planning? Should you be waiting too? Of course not. So, to give you a nudge into action, here is my checklist of some Estate Planning To-Dos for you. I will start you off with ten items. From there, you can add your own.

  • Review your Will, your Trust, and the beneficiary designations on your life insurance policies, your annuities, and your IRAs. You must do this on a regular basis. Are all parts of your plan consistent? Do these documents reflect your current intentions regarding where your assets will pass at your death? Did you know that your beneficiary designation forms will override any plans you have made in your Will or Trust for those assets? For example, if you name one child as the beneficiary on your IRA, he or she will receive that IRA, regardless of whether your Will or Trust leaves your estate equally to all of your children.
  • Do you recall whom you nominated as the personal representative of your estate and the successor trustee of your trust? Has anyone died or become too infirm to act? Do you need to choose replacements? If you have a Living Will and a Health Care Advance Directive, are the agents you named several years ago still able and willing to make medical decisions for you if you become ill or incapacitated?
  • Does someone know where you keep your original signed documents — your Will, Trust, Durable Power of Attorney, Living Will, and Health Care Advance Directive? The agents you have appointed under these documents must know where the originals are kept. The agent must be able to access the original document to be able to act for you. In most instances, a photocopy will not be accepted.
  • Make a detailed list of your assets and keep it updated. List where your assets are located. List how they are titled – joint with spouse, in trust name, your sole name, joint with child, etc. List any beneficiary designations you have submitted to the life insurance company, the bank, your IRA custodian, or your benefits manager at work. If you keep this list on your computer, be sure someone trustworthy has your password!
  • Check your deeds. Who owns the title to your Florida homestead? If you are married or if you have minor children, Florida has special rules concerning the disposition of your homestead at death. If you do not own your homestead in joint names with your spouse, you should be aware of how those rules may affect your estate plan.
  • Consider pre-paying for your funeral costs or at least making your funeral arrangements. Who knows what your wishes are? Who will pay for those costs that will be due immediately at your death?
    Make your annual gifts for 2008. The federal gift tax exemption for 2008 is $12,000 per recipient. You may also make unlimited gifts for tuition and medical expenses if paid directly to the provider of the services. If you are trying to reduce your taxable estate through gifting, then generally, it is wiser to make these gifts earlier in the year. Otherwise, if your death occurs during the year, you lose the opportunity to make that last set of gifts. Good intentions are not enough!
  • Talk to your estate-planning attorney about making more sophisticated gifts through an irrevocable trust, such as a grantor retained annuity trust or “GRAT.” Property values are hitting their lows and interest rates are also low – two variables that make these types of trusts worth looking into again. Because interest rates drive the value of the annuity or retained interest, the use of a GRAT in a low-interest rate environment may be a good idea because it reduces the value of the remainder gift and provides a “low” benchmark for returns that must be generated to maximize the effectiveness of the GRAT.
  • As I mentioned, the federal estate tax exemption amount will increase to $3,500,000 in 2009. If you have a “marital deduction” plan in your Will or your Trust, this means that the non-marital trust (our office calls it the “Residuary Trust Share”) will be funded with up to that amount at your death. The marital deduction trust will be funded with what remains. If you have not provided for your spouse in the non-marital trust, you need to review your assets. Will there be enough funds outside of the non-marital trust to support your spouse? Do you need to revise your plan?
  • If you serve as the trustee of a trust (not your own), check with your attorney and find out if you comply with the provisions of the new Florida Trust Code enacted last year. For instance, you should know that the Florida trust accounting rules have changed. Trustees of Florida trusts are required to provide annual accountings to the “qualified beneficiaries” of a trust. Find out whom those people are and what you must provide to them.

Have I given you enough to do? Well, here is one final project: Make an appointment to see your estate planning attorney for a checkup. He or she can help you get through your Estate Planning To-Do List quickly and painlessly.

For more information regarding this article, please contact Linda Getzen at  941-329-6622 or