A note from Lee R. Phillips

You may be starting to see warnings about your estate planning in 2010.  The estate tax has been repealed.  All Right!!!  It is a great year to die.  NOT SO FAST.  Don’t kill yourself yet.  All is not what it seems to be.

First a little reassurance that what you have done using the LegaLees system is ok.  The warning says that under a lot of estate plans the surviving spouse (spouse that lives after the first one of the couple dies) can be left out in the cold.  That won’t happen with the living trusts and wills in the Accumulation and Preservation of Wealth set.  The warning is for wills and trusts that try to control estate taxes by passing all or part of the estate directly to the children, not the surviving spouse.

My goal is and always has been to protect the surviving spouse.  The trusts are set up so that a shelter trust is created which removes the maximum amount that the deceased spouse could pass to the children without an estate tax (the “exemption equivalent” as the amount is called in the legal industry).  That amount changes.  It has been going up for the last decade, from $1 million to $3.5 million last year.  So if a couple had $4 million in assets and the husband died in 2009, a trust (Trust B) would have been created to “shelter” $3.5 million from estate taxes when the wife died.  This whole thing is explained in detail in my book, Guaranteed Millionaire.  It is a great read (not a boring financial book).

In many estate plans the $3.5 million would go directly to the kids and the other $ .5 million would go to the surviving spouse.  Actually, in a bigger estate, say $10 million, that scenario would be ok, because the kids would get $3.5 million and the surviving spouse would get $6.5 million.  Now that the estate tax has been repealed, the way many documents read the entire estate would go to the “shelter” and drop directly to the kids.  The surviving spouse wouldn’t get anything.

Don’t worry, all of the documents I use leave the full estate, including the shelter trust, in the control of the surviving spouse for his or her benefit.  The surviving spouse isn’t left out in the cold.

In spite of all the jokes about it being a great year to die, it really isn’t a good year to die, because it is going to be a mess.  Congress is going to put the screws to us again.  “Ten years ago, there was a lot of gallows humor about repeal when everybody said it would never happen,” said Rep. Richard Neal (D., Mass.), chairman of the House Select Revenue Subcommittee. “Now, one of those never-happen moments has happened, and nobody’s laughing.”

He went on to say that “there is no question” Congress will reinstate the tax, retroactively to Jan. 1, early next year. That is also the intention of Senate Finance Committee Chairman Max Baucus (D., Mont.).

Do you really think that Congress is going to eliminate estate taxes, when they are spending like drunken sailors and looking under every bush they can find for every dime they can find?  Just hang with the estate plans you have already.  I am confident the LegaLees materials will get you through the mess Congress has created.  I will keep you updated as new info comes along.