If computers lasted indefinitely or cars never fell apart, there’d never be the need to replace them. If Windows 95 still worked in 2010, who’d ever need Vista, let alone Windows 7?
But that’s not how business works. Make something “new and improved,” and they’ll beat a line to your doorstep.
So leave it to a few lawyers, who instead of cheering the elimination of estate planning uncertainty by the belated passage of a new estate tax law, are instead wringing their collective hands at potential lost business. The new law revives the estate tax, which had disappeared in 2010.
Bad news for law business?
Uncertainty breeds business. When things were in limbo, some estate planners, whether they wanted to admit it or not, viewed this as a good thing. Think of all the possible revisions, the asset-protection schemes, the what-if scenarios, and the serial wealth-management contingencies in the offing. But to a large extent, these have now evaporated into the ether since the new law’s $5 million individual exemption means that more than 99.7 percent of estates will owe no estate tax, let alone the $10 million between a married couple. For more about THE ESTATE TAX: MYTHS AND REALITIES, see the report from the Urban Institute-Brookings Tax Policy Center.
Hani Sarji, in “Obama Estate Tax Deal Would Chill Estate Planning,” Forbes, Dec. 7, 2010, quotes one lawyer who thinks that with the exemption set at $5 million, “many people” will be “even less inclined to get a will.” Also writing in the same issue of Forbes, Brian Wingfield further divines “How the Tax Compromise Might Affect Estate Planning,”
There’s no interest like self-interest. So is it any wonder that consumers remain reliably skeptical that lawyers will always look out for their best interests instead of their own?
An avariciousness deferred till 2012.
Other losers in the no-estate tax sweepstakes are those avaricious beneficiaries of the super-duper rich who truth be told, might have hoped, with apologies to John Gillespie Magee, Jr, that their wealthy ancestor had “slipped the surly bounds of earth” to “reach out and touch the face of God” during no-estate tax 2010.
But it wasn’t to be, thanks to the mouthful of a bill entitled the Reid-McConnell Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. Cobbled together by President Obama, recalcitrant Republicans and equally foot-dragging Democrats, the new law punishes the audacious impertinence of the feebly well-heeled who failed to punch out last year, thereby safeguarding an optimal largesse for a besotted heir.
‘Suffering’ through a new ‘death tax.’
Now the scions of the super wealthy will have to suffer through a maximum estate tax rate of 35 percent with a $5 million exclusion and with further provisions providing for “portability” of a spouse’s unused exemption. A married couple can exempt $10 million from the estate tax.
Asset beneficiaries will also receive a step up in basis equal to the date of death value of the asset. The new law gives estates the option to elect to apply the estate tax at the 35 percent and $5 million levels for 2010 or to apply a carryover basis for 2010.
Of course, given the nasty political partisanship that passes for statesmanship these days, the new tax deal is only a short-lived compromise. It’s only in place for those kicking the proverbial bucket in 2011 and 2012. After that, the bets are off, conveniently about the same time the next election cycle resumes.
That’s when the tax cut extension and death tax piñata gets batted around all over again by gawd-danged idiot politicians to score political brownie points with average working stiffs who think the super-rich’s death tax applies to them.
But in truth, as far as lawyers are concerned, new estate tax deal or not, continued client procrastination is unjustified. Simply put, unless people prefer their state governments to decide who gets their ‘stuff’ when they die, the smarter option still is to create your own estate plan. And this should always be the case, even if you aren’t among the blessedly rarefied .3 percent of Americans who’ve resumed their worrying about beating the tax man. After all, the most time-honored way of getting rich is still by inheritance.
So for the rest of everyday working folks, lawyers needn’t fret a loss of estate planning work with the advent of greater certainty. The other 99.7 percent will still need their help, especially when studies continue to show year in and year out that “Most Americans Don’t Have a Will, Says New FindLaw.com Survey.”