Will the Lack of an Estate Tax or a High Exemption Impair Necessary Estate Planning

A simple fact most people know is that death is an unpleasant topic and people do not like to talk about it, which often causes many people to put off implementing a comprehensive estate plan. Although there is a difference of opinion regarding whether an estate tax should exist--it does serve one useful purpose. It does motivate many people to do wealth transfer planning, which is comprised of estate tax elimination or minimization and how property should be inherited with trusts frequently used to solve the estate tax problems for children and grandchildren as well as protect the inherited assets from creditors of a beneficiary or a beneficiary's spouse in a divorce proceeding. A well crafted plan can also help eliminate or minimize probate expenses, avoid Will contests, and other fights among family members. If there is not the estate tax to drive a person to the planning table will other planning that would be beneficial to a family be neglected?

Let's hope not--but from experience, I know many persons will procrastinate too long if the estate tax threat is not there to motivate them to plan.

Reasons to Draft a Will

Many people view estate planning and drafting a will as unnecessary; they believe that the law provides that upon their death everything will simply pass to their closest living heir.  While this may be true in some circumstances, it is always better, and usually cheaper, to prepare a plan so that you know that your estate will be distributed as you wish. 

Dying intestate (without a will) in Texas will usually require a more lengthy probate process to determine all of the estate's assets as well as any beneficiaries.  For example, a male in Texas who dies intestate would require the court perform an heirship proceeding to determine if he had any unknown children, which would be the first in line to inherit.  This requires the court to appoint an attorney to research this, the cost of which is ultimately born by the estate.  Having a will, however, would allow this person to determine who they wanted to leave their estate to while "disinheriting" any unknown heirs.

There are a number of ways having a knowledgeable attorney help plan your estate can save your estate, and loved ones, time, money and grief.  Specifically, wills can:

Make distribution of assets easier - A will can list specifically which assets you own, and to whom you wish to bequeath those assets, helping avoid a drawn out process that is administered by the court or its representative.

Name a guardian for your children - Without specifically naming a guardian, this most important of decisions would be left up to the state.

Limit fighting among family members - A properly drafted will is much less likely to be challenged by surviving family members than is a an estate that is being probated without a will. 

There are many other ways in which wills and planning can help you and your heirs.  As the size of the estate increases, additional planning can help reduce the tax burden that will be placed on the heirs, as well as help transition family owned businesses and enterprises.

With Estate Tax in Limbo, What You Can Do to Protect Your Wealth

Under the 2001 Bush tax cuts, the federal estate tax expired on Jan. 1, 2010, but only for a year, reappearing on Jan. 1, 2011, with only $1 million in assets exempt from a 55% tax on all assets not left to a spouse or charity. Additionally, a long-standing step up provision, which adjusts the basis of the market value of someone's assets to the value at his or her death, has also lapsed for 2010.

According to Forbes, there are a number of steps you should take now to protect your wealth:

1. Make plans in the event someone dies this year with no estate tax, or next year with only a one million dollar exemption;
2. Find your basis for securities and other real assets;
3. Consider a non-heir executor in case difficult decisions need to be made; and
4. Give to your heirs while you are still alive.

Congress will eventually act, but you should do everything you can to protect yourself and your family until they do.