Two CNBC articles.
On May 24, 2010, CNBC published two articles that discuss the federal estate tax. Both articles were written by Jessica Rao:
[1.1] How To Manage Your Death Portfolio -- discusses
- Having a “Family Love Letter,” which is a document that “includes an inventory of advisors, assets and other information. It even contains details like account passwords, what frequent flyer miles you have, and if a neighbor owes you money.”
- Creating trusts for minors, for life insurance, for flexibility, to avoid probate.
- Having advance medical directives.
- Keeping beneficiary designation forms up-to-date.
- Having contingent beneficiaries.
- Calls the estate tax repeal “a one-year wonder.”
- Discusses the benefits of gifting assets in 2010.
- Also discusses investing in municipal bonds and contributing to 529 college saving plans.
 Advice may sound similar but have a different tenor.
Both articles conclude with similar sounding advice:
- “People should do what they want, regardless of the tax consequence"
- “Never do anything just for taxes”
The two points may sound similar, but as the discussion below shows, they have very different tenors.
[2.1] Consequences (especially tax consequences) should never be ignored.
It is surprising to read the first point as the conclusion to an article that also states that “[i]f you don’t make appropriate financial plans, loved ones could pay unnecessary taxes.” People should never ignore the consequences of their actions, especially the tax consequences.
The folly of the first point becomes apparent when considering insight from Matt Brady, head of Wealth Advisory, Americas, at Barclays Wealth:
If you can save on taxes, that almost means more than any amount of investment performance because the difference between capital gains, for instance, and ordinary income, is 20 percentage points . . .
If you can be efficient in having most of your returns in capital gains, then there is no amount of outperformance that you can realistically achieve that makes up for that.
Quoted in John McCrank, Barclays Wealth sees scramble on U.S. tax burden, Reuters, May 26, 2010.
If a 20 percentage point spread is important, think about how avoiding a 45 percentage point liability can enhance the wealth of your family.
[2.2] Tax planning is one aspect of estate planning.
The second point is valid and is sound advice. Tax planning is just one aspect of effective estate planning.
If you are interested in learning about some of the other aspects of estate planning, you might consider attending the following CLE:
Tuesday, June 8, 2010
Format: Teleconference and Live Audio Webcast
Duration: 90 minutes
Sponsor: The American Bar Association Section of Real Property, Trust & Estate Law
Do you create impressive estate plans that negatively impact your clients' control, cash flow and financial statements? Are you trained to understand the dynamics of basic family psychology?
A client and their family are likely to judge the ultimate success of an estate plan based on personal concerns, not the legal and tax merits. A technically flawless plan may fail to achieve a client's goals if the planner does not consider family dynamics, client tendencies, and other non-tax, non-legal factors. Deciding on the techniques to recommend and provisions to draft requires considering more than the technical aspects of a plan, which estate planners may tend to overlook. Proper consideration of these non-legal, non-tax factors can help planners reduce serious potential problems, including future estate disputes, IRS audits, client complaints, and disputes with the client's other advisors.
Join us as our panel discusses 25 factors to consider and how being aware of the unique personal, family and business issues each client presents can lead to a better result for everyone involved.
- Avi Z. Kestenbaum, Esq., Meltzer, Lippe, Goldstein & Breitstone, LLP, Adjunct Tax Professor at Hofstra University School of Law and the Baruch College MBA Program, Mineola, NY
- Marvin Blum, Esq., The Blum Firm, P.C., Fort Worth, TX
- Al W. King III, JD, LLM, South Dakota Trust Company LLC, New York, NY
(Note: law students can register for the Webcast for free.)