What to Know About Your Estate Plan in 2010

Morningstar

Christine Benz: Hi I’m Christine Benz for Morningstar.com here with Tom
Abendroth. Tom is a partner at Schiff Hardin and he’s also an estate
planning specialist so Tom thanks for being here.

Tom Abendroth: My pleasure Christine.

Christine: So Tom let’s talk about the current state of flux in the estate planning tax,
in the estate tax currently there is no estate tax for 2010 which a lot of
people in your shoes didn’t expect to happen but here we are.

Tom: That’s right.

Christine: So how should people be thinking about this and should they be making
any changes to their estate plans and light of all that we don’t know?

Tom: Well first stay alive is my first piece of advice.

Christine: So don’t die in 2010.

Tom: Don’t die.

Christine: You don’t know the joke was that you should die in 2010.

Tom: Yeah suggestions there are a lot of suggestions that it would be a good
year to die and that of course is way over blown and probably premature.

Christine: Why is that? I mean what would be the negative ramifications of dying as
apart from dying?

Tom: Well as we will discuss the estate tax may come back so you may have
this individual who blissfully passes away thinking his estate is passing
tax free and low and behold 9 months later he looks down or looks up
depending on his or here location and finds that the estate is paying estate
tax that still might happen.

Christine: So claw back is that what you’re talking about so that the current estate tax
repeal would be undone and they would come back and take a state taxes
that should have been assessed but were not.

Tom: Exactly that is one of a lot of things we simply don’t know now. We don’t
know if the estate tax will in fact be back in 2010. We don’t really know
what a lot of the rules are right now for big life time transfers of property,
we don’t know exactly assuming it does come back and we’re pretty
certain it will whether it will come back with the old rules that applied in
2009 or the rules that they have set for 2011 or something else entirely.

Christine: So don’t die that’s good advice and then in terms of my estate plan are
there any changes or any, should I be doing anything give the state of flux
or should I just leave it be?

Tom: Well our advice has been for most people their estate plan if it was well
done in the first place will function just fine in this period of uncertainty.
Now unfortunately that’s not going to be the case for everybody and of
course most individuals don’t know which category they’re in. So we’re
suggesting that it is the safe course to come in and review your estate plan.

A lot of people are making the decision not to do that because they think
the risk of dying this year is so small okay, you know that’s fine, we can
understand that now certainly though if its an elderly person or someone
who is in very bad health I think the wise course is to come in and have
your estate plan reviewed.

Christine: So of course there might also be life changes that would prompt you to
seek an estate planning attorney that have nothing to do with a state plan
taxes or anything like that so you might have a new child or something
like that and you want to figure out the guardianship situation?

Tom: Well certainly if you don’t have an updated estate plan. You should have
been in already and the current state of uncertainty doesn’t change that
someone who has gone 5 or 10 years should come in and have it looked at
regardless of what’s going on right now. A couple of other categories of
people who are probably more at risk for needing their plan updated. One
is second marriages. First marriages usually the spouse is a beneficiary of
whatever trust is created. Second marriage is your more likely to have
things go one direction or the other and given the state of the law right
now if those allocations are being made based on tax decisions may be
distorted.

Christine: Okay.

Tom: Second someone who wants to push property down to grandchildren or
trust for lower generations and they’ve done everything to try to do that
they die in 2010 without a state tax that’s where everything could go
which may not be what they want.

Christine: Okay.

Tom: And then finally people who have charitable oriented formulas, very
common to have an estate plan that says I leave everything that I can leave
tax free to my children. I leave everything else to charity sort of the
Warren buffet plan supposedly.

Christine: Right exactly.

Tom: Right now if there’s no estate tax everything would go to the children
again probably not what they want.

Christine: So how about for someone who is the loved one of a person who passes
away this year, are there any things they should keep in mind as they go
about attempting to settle the estate?

Tom: Well there’s been a lot of talk Christine about delaying, doing anything in
a state because of the uncertainty just to sort of putting a freeze on
everything.

Christine: Exactly.

Tom: Well the point of fact is that a state administrations take time anyway and
a lot of what you do isn’t tax driven so that shouldn’t be a motivation you
should keep doing what you need to do after someone passes away. A lot
of the tax decisions that have to be made aren’t made anyway until at least
9 months after the date of death and in some cases 15 months if you take
an extension for filing the estate tax return so I want to say delay is the
proper approach rather it is proceed as if the rule still existed.

Christine: Okay.

Tom: And assume that you might have to pay a tax and hopefully 9 months from
now we’ll know a little more about what’s going on in the matter of will
have the clarify it, now if we actually get there and its not then you may
have some delays that are going to occur.

Christine: Further delays.

Tom: Further delays.

Christine: Of what might already be a delayed process. Well Tom thank you so much
that’s helpful information.

Tom: My pleasure.

Christine: Thanks for watching I’m Christine Benz for Morningstar.com.