Feeling Generous?

This might just be the year to give!

As the estate tax saga draws on, many have overlooked the gift tax and the current tax savings opportunities available. Currently, the gift tax rate is 35%, the lowest rate since the 1930s. The gift tax rate is set to increase to 55% in 2011. This 20 percentage point difference results in a 57% tax rate increase.

For those with significant wealth, reducing your estate through gifting may be an option to consider. However, as Paul Sullivan points out in his recent article, A Year to Give to Your Heirs, and Save on Taxes, there are many things to think about, including the potential psychological impact that could result from bestowing great wealth upon heirs and raising a red flag to the IRS.

Gifting as an estate planning technique has never been more attractive and for some it may make perfect sense.


Congratulations! You have created an estate plan, but now, where to keep the documents. Your estate plan likely includes a Healthcare Directive, a Power of Attorney, a Will and possibly a Trust.

The Healthcare Directive and Power of Attorney are needed in the event of incapacity. The Will is needed upon your death. In either event, when the documents are needed, you will not be able to direct someone to their location.

Copies of the Healthcare Directive are acceptable and should be provided to your doctor(s) and the hospital anytime you are admitted for a procedure. Originals of the other documents are generally required and should be safeguarded until they are needed.

It is important that a few trusted people know the location of your estate planning documents and how to access them. A safe deposit box at a bank is NOT such a location. But why? Yes, they will be safe there; however, the documents granting someone access to the safe deposit box (i.e., your Power of Attorney) will be in the safe deposit box.

Instead, the recommended location for your estate planning documents is a fire-proof safe at your home or the home of someone you trust. Recently, I learned from a few fire fighters that an alternative location in the absence of a fire-proof safe is your freezer or deep freeze! If you choose this alternate option, you will need to protect the documents from the elements (i.e., pack the documents in multiple ziplock bags or a Tupperware container).

Remember, someone else (in addition to your spouse) needs to know both the location of the documents and how to access them.

Federal estate tax, or the current lack thereof, is a hot topic for many. But usually it’s not a topic tied to Major League Baseball.

The passing of George Steinbrenner, owner of the New York Yankees, is being discussed with respect to federal estate taxes. Check out Steinbrenner’s final win – over estate taxes by Kelly Phillips Erb.

This is the fourth high-profile death in 2010 thought by many to have influence over what might happen with federal estate taxes this year. In addition to Steinbrenner, the four include the following:

The first being Dan Duncan, the multi-billionaire from Texas who passed away in March. Dan Duncan’s fortune is estimated at $9.8 billion. His heirs likely saved more than $4 billion in estate taxes.

Second, Walter Shorenstein, a California real estate mogul passed away in June. His net worth is estimated at $1.1 billion.

And finally, Mary Janet Morse Cargill, part of the Minnesota family that founded Cargill Inc., died in February. Her net worth is estimated at $1.6 billion.

Many speculate that retroactivity of a federal estate tax back to January 1, 2010 will not occur given the financial means in the four estates mentioned above to challenge any such legislation.

Only time will tell what Congress will do. For now, we will continue to wait for Congress and the President to move forward on this issue.

Cost and convenience are often deterrents to completing an estate plan. Consequently, many individuals and couples turn to “Do It Yourself” (DIY) options.

Plenty of DIY options exist: websites, other online applications, books with CDs, etc. These options are admittedly less expensive; however, you get what you pay for … and that is not much. These options may save you money on the front end; however, for a variety of reasons (discussed below) they often end up costing you more later and/or they fail to accomplish your goals.

DIY estate planning falls short in many ways:

  1. No legal advice. The fine print and warnings typically state that no legal advice is provided. How can you be completing legal documents without any legal advice? An estate planning attorney’s job is to assess your situation, make recommendations, educate you and create a plan that best fits your needs and objectives.


  2. One size fits all. DIY options are not interactive enough to discover all issues that should be considered. You cannot communicate your goals and wishes with the DIY options. You cannot discuss your family, health and financial situation with the DIY options. The DIY options cannot explain to you what would happen without an estate plan (or with an existing estate plan under current law). And, the DIY options cannot explain your options so that you can choose the best fit for your family’s needs. Consequently, you cannot be sure that the DIY generated estate planning documents achieve all of your objectives.


  3. What if. DIY options often fail to plan far enough and provide for a back-up guardian, personal representative or trustee.


  4. Trust distributions. A trust is recommended for the control and maintenance of property left for minor children. With the assistance of an attorney, you can create and structure a trust and its distributions according to your beliefs. The possibilities are endless. DIY options are not built to permit flexibility in the trust distribution terms so you often receive a cookie cutter plan.


  5. Incapacity planning. Estate planning includes planning for incapacity. DIY options often fail to plan for this possibility. This failure can become quite costly should your loved ones later need to go to court to get someone appointed to act on your behalf. Additionally, consider what would happen to your minor children should you become incapacitated.


  6. Beneficiary designations. Beneficiary designations on life insurance policies and retirement accounts often need to be changed in order to comply with your overall estate planning objectives. DIY options often do not walk through this additional step. Failure to change beneficiary designations can negate any estate planning undertaken.


  7. Additional children or grandchildren. Many DIY options do not include subsequently born or adopted children. This can cause serious issues for growing families.


  8. State specific. Estate planning, including incapacity planning, is largely governed by state law. DIY options are generic and therefore may not comply with or include Minnesota specific rules. Additionally, DIY options often do not keep up with changes in state law due to state court opinions and interpretations or regulatory updates.


  9. Thinking outside the box. DIY options do not plan for what you do not tell them. DIY software can ask questions and books have a question list; however, there is no conversation with an attorney that permits thinking in response to your answers. Therefore, it is very possible that something unique to your situation will be overlooked.


  10. Tax planning. Tax planning is both a federal and state issue. DIY options do not consider both aspects; therefore, you may be missing out on tax savings opportunities.


I am all in favor of DIY projects; however, DIY estate planning is something you should think twice about. Although DIY options purport to be cost effective and to provide “peace of mind,” you may not be getting what you bargain for.

If you insist on doing it yourself, I suggest that you at least invest a little time and money to have an attorney review your documents and provide feedback. It is well worth the investment to be sure your documents say what you want and comply with Minnesota law.

I recently found this article on the New York Times, entitled “Assemble a Paper Trail, and Make Sure Your Heirs Can Follow It” by Paul Sullivan.

The article ties in nicely to my most recent post “Get Organized.” In addition to getting organized, it discusses the importance of having estate planning documents in place (i.e., a will or trust or both) as well as documents that plan for incapacity.


Get Organized

Help your family by getting organized. I undertook this exercise a few years back with my husband, creating the “Emergency Binder.”

The Emergency Binder contains everything my spouse and I would, could or should ever need in the event either one of us became incapacitated or passed away. The goal is to make it easy for a surviving spouse or a personal representative to locate all of your assets, pay the bills and otherwise deal with any financial or health issues that may arise.

Here is a (non-exhaustive) list of items that should be included in your Emergency Binder:

  • Utility or vender information
  • Bank account information
  • Insurance policies
  • Investment and retirement accounts
  • Social security numbers
  • Car title(s)
  • Deed to the house
  • Other real estate documentation
  • Estate planning documents, including wills, trusts, health care directives and powers of attorney
  • Names and contact information for any professionals, maintenance personnel or others you call upon during the course of the year
  • Photos of each room in the house documenting the room’s contents
  • Any other asset or liability information and/or important documents, contact information, etc., pertinent to your life

For each of the items listed, account numbers, payment due dates, contact numbers and online account access information should be included.

By compiling all of these items into a central location, you can ease a significant amount of stress and anxiety for loved ones when such information is needed. You also ensure that assets are not overlooked and bills are promptly paid.

Admittedly, the exercise of collecting and organizing this information is not quick or easy. However, the first time is the worst. Once you establish your Emergency Binder, updating annually is a breeze. Once created, it is important to safeguard your Emergency Binder. Your Emergency Binder should be housed in a fire-proof safe. In addition to your spouse, a close friend or a family member needs to know the location of the Emergency Binder and how to access it in case of emergency.

In sum, get organized! For the sake of your loved ones, create your own Emergency Binder.

An estate plan is more than a Will. It is an overall coordinated plan addressing your legal, financial, medical and personal needs in the event of incapacity or death.


Estate planning is about CONTROL and CHOICE.  Planning permits you to express your wishes and preferences over WHO and WHAT: Who will act on your behalf? What happens to your body and the items you own?


Estate planning is about being proactive by:

  • Providing instructions on the management, distribution and care of your affairs upon incapacity or death
  • Providing guidance to loved ones in making difficult decisions
  • Minimizing probate costs or avoiding probate altogether
  • Avoiding painful emotional conflicts between family members
  • Avoiding lengthy court battles


Each family’s estate plan will be unique. If you have minor children, you need an estate plan in order to do any of the following:

  • Appoint a guardian for minor children
  • Provide financial protection for your children
  • Appoint agents to act on your behalf regarding health care and financial decisions
  • Make special, sentimental or charitable gifts
  • Engage in estate tax reduction planning
  • Coordinate beneficiary designations on life insurance policies and retirement accounts with your estate plan