Future of the Federal Estate Tax

Thank you for your support and encouragement, and please vote Future of the Federal Estate Tax into ABA Journal's top 100 blawgs

I have received a number of wonderful e-mails encouraging my blogging efforts.  Thank you so much for your kind words. (Also for those of you who e-mailed me with requests for coverage, I will be responding to your e-mails over the weekend.  Thank you for your patience.)

Here are two statements of support that were made publicly:

[1] Tweet by Deborah L. Jacobs, the author of Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide and an award-winning journalist:

[2] Blog post by Professor Gerry Beyer on Wills, Trusts & Estates Prof Blog:

I would like to remind you that you still have time to vote Future of the Federal Estate Tax blog into the ABA Journal’s top 100 Blawgs.  Please do so no later than Friday, October 1, 2010:

LexisNexis Estate Practice & Elder Law Community: "Point/Counterpoint - The Estate Tax"

On September 7, 2010, Point/Counterpoint - The Estate Tax was posted on LexisNexis Estate Practice & Elder Law Community. This post summarizes arguments for and against the estate tax from three recent sources:

• Robert Rubin And Julian Robertson, Bring Back the Estate Tax Now, The Wall Street Journal, Sept. 1, 2010.
• Richard Epstein, Let the Estate Tax Die a Merciful Death, Forbes, Sept. 2, 2010.
• Gerry W. Beyer, Pointing Out Fallacies in Pro-Estate Tax Arguments, Wills, Trusts & Estates Prof Blog, Sept. 7, 2010.

LegalZoom is sued, again

LegalZoom is being sued in a class action for unfair and deceptive business practices.  For a summary of allegations see Dan McCue, Class Claims LegalZoom Is Unfair & Misleading, Courthouse News Service, June 1, 2010.

McCue reports: 

A class action accuses LegalZoom, an online legal document preparation service, of unfair and deceptive business practices. . . .

Katherine Webster sued as executor of the estate of Anthony Ferrantino and trustee of the Anthony J. Ferrantino Living Trust. . . .

Webster claims the defendants failed to comply with laws and regulations governing practice of law in California, led customers to practice law without a license, assisted in unauthorized practice of law, and used fraudulent business practices. She seeks disgorgement and punitive damages for negligence, elder financial abuse, consumer law violations and illegal and unfair business practices.

Others have blogged about this lawsuit:

• Candice N. Aiston, LegalZoom sued!, Oregon Estate Planning Blog, June 4, 2010 (“I'm glad that someone is finally stepping up to fight LegalZoom.”). 
• Gerry W. Beyer, LegalZoom Class Action Lawsuit, Wills, Trusts & Estates Prof Blog, June 4, 2010.
• Brian Ellexson, LegalZoom Class Action Lawsuit, Elia Ellexson PLLC, June 4, 2010 (“Do you think this will help clients see the danger of using LegalZoom for DIY estate planning?  I have a feeling that our profession still has a lot of education to do before we get to that point”). 
• Joseph Timothy Hahn, LegalZoom Sued In Class Action For Deceptive Business Practices, Hahn’s Estate Planning Blog, June 2, 2010.

Note that this suit is not the first legal challenge that LegalZoom has faced.  A February 19, 2010 ABA Journal post reports that

LegalZoom is facing a potential class action that claims the company is unlawfully charging consumers for the preparation of legal documents.

An amended class action petition(documents posted by IP Watchdog) filed in January seeks a refund of all fees paid to LegalZoom by Missouri consumers. The company is seeking to remove the suit to federal court, according to IP Watchdog. . . .

Brian Liu, a lawyer who is co-founder and chairman of LegalZoom, spoke to the ABA Journal about the lawsuit for an article expected to be published in an upcoming issue of the magazine. “LegalZoom is aware of the Missouri lawsuit and is confident we have not violated any laws,” he said. “Class actions of this nature are common tactics of plaintiffs' attorneys. We intend to vigorously defend the plaintiffs' claims.”

Debra Cassens Weiss, Suit Claims LegalZoom’s Document Prep Is Unauthorized Practice, ABA Journal, Feb. 19, 2010.

LegalZoom may or may not have violated any laws, but its users should be very careful.  The law is complicated and mistakes can be very costly.

Law & Order episode: inheriting free of federal estate tax as a motive to kill

A May 10, 2010 episode of Law & Order, “The Taxman Cometh,” centered on the 2010 repeal of the the federal estate tax:

Detectives Cyrus Lupo (Jeremy Sisto) and Kevin Bernard (Anthony Anderson) are called in to investigate the death of a young heiress, Annie Douglas (guest star Morgan Lynch), who died of an apparent drug overdose. The detectives begin to suspect her cousin, Randy (guest star Daniel Abeles), whose inheritance was increased due to Annie's death. As the investigation continues, Annie's greedy relatives reveal another recent loss in the group. The case becomes more than a family matter as an experimental cancer clinic, fraudulent adoptions and unborn children are tied into the case.

Here is a clip from this episode:

In addition to dying free of the estate tax in 2010, an adoption of a same-sex partner is central to the plot. In Ripped From Which Headline? “The Taxman Cometh” (Brow Beat, May 11, 2010), June Thomas provides background on the real stories on which the episode is based.

(Note: You can view the full episode of “The Taxman Cometh” on the internet.  A search of "law and order" full episodeyields a website that has “Taxman Cometh” along with other Law & Order episodes.) 

Other writers have posted on this episode of Law & Order, including

• Gerry W. Beyer, Law & Order Episode Incorporates Estate Tax Mess, Wills, Trusts & Estates Prof Blog, May 22, 2010.
• Paul Caron, Art Imitates Life: The Estate Tax on Last Night's Law & Order, TaxProf Blog, May 11, 2010.

Death of billionaire, Dan Duncan, might make a retroactive estate tax less likely

Dan Duncan died on Sunday, March 28, 2010, at the age of 77 and was “one of the world’s least-know billionaires.”  Russel Gold & Stephen Miller, From Roughneck Origins to Texas Billionaire (Wall Street Journal, 3/30/10).  Duncan was the co-founder, chairman and majority shareholder of Enterprise Products.  He died with an estate that is estimated to be around $9 billion. 

Duncan died in a year when there currently is no federal estate tax.  Scott Martin cogently states, “Washington lawmakers’ estate tax hiatus has now potentially cost the IRS billions in lost tax collections.”  Billionaire’s Heirs First to Win 2010 Estate Tax Jackpot (The Trust Advisor Blog, 4/10/10).

Martin further informs that “probate gurus” believe that the death of Duncan will make a retroactive estate tax less likely:

Experts say death of Texas billionaire Dan Duncan makes retroactive reinstatement of the death tax less likely because the stakes are now a lot higher.

Houston gas pipeline mogul Dan Duncan was the 74th richest person in the world when he died on March 28. If he’d passed away three months earlier or ten months later, his $9 billion estate could have generated up to $4 billion for the IRS. But because there’s no federal estate tax this year, the government gets nothing.

As the first billionaire to die in this year without an estate tax, Duncan presents a tempting opportunity for a revenue-strapped Congress to follow through on threats to reinstate the tax for 2010 and possibly even make it retroactive to the beginning of the year.

However, probate gurus say the sheer amount of money on the table makes a retroactive tax more unlikely. Big estates mean big lawyers ready to fight to see those billions of dollars go to the deceased’s heirs, and the headaches could go on for years.

See also

• Gerry W. Beyer, Black Gold Billionaire Dies in 2010, Benefiting from Federal Estate Tax Repeal, Wills, Trusts & Estates Prof Blog (4/1/10).
• Gerry W. Beyer, Big Estates in 2010 May Be an Incentive Against a Retroactive Estate Tax, Wills, Trusts & Estates Prof Blog (4/13/10).
• Joe Carroll and David Wethe, Dan Duncan, Billionaire Philanthropist, Dies at 77 (Update1), BusinessWeek (3/30/10).
• Dan Duncan, Wikipedia.
• Robert Frank, Oil Magnate’s Death Costs U.S. Millions in Foregone Taxes, Wall Street Journal Blogs: The Wealth Report (4/14/10).
• Clifford Krauss, Dan L. Duncan, Oil Billionaire, Dies at 77, New York Times (3/30/10).
• David Shulman, The First Multi-Billionaire Death of 2010: The Year Without an Estate Tax Continues, South Florida Estate Planning Law (4/15/10).
• Casey Wooten, Dan Duncan dies at 77, Houston Business Journal (3/29/10).

(Special thanks to Professor Robert G. Nassau for bringing this news to my attention.)

Enter the KYEstates 2010 Estate Tax Forecasting Contest!

Carter Ruml, author of KYEstates.com, has started a 2010 estate tax forecasting contest.  Here is Ruml’s description of the contest:

In the KYEstates Estate Tax Forecasting Contest, the readers who most accurately predict the exemption level and maximum rate in effect for January 1, 2011 and when definitive legislation will be enacted will win prizes from the KYEstates Store. You can enter the Contest by emailing KYEstates at carter{at}kyestates{dot}com.

(The first ten readers submitting entries will be entered in a random drawing for a prize to be awarded soon after receipt of the tenth entry, so don’t delay.)

There will be prizes awarded for

• Best Overall Prediction.
• Most accurate exemption level.
• Most accurate maximum rate level.
• Timing of definitive legislation.
• Participation.  One contestant not winning in one of the other categories will be drawn at random for a prize.

For more, see The KYEstates 2010 Estate Tax Forecasting Contest. 

I agree with Prof. Gerry Beyer’s remarks about Ruml’s contest: “This friendly contest should be fun for those who participate and entertaining for all when the final results are released.”  Estate Tax Prediction Contest Hosted by KYEstates.com (Wills, Trusts & Estates Prof Blog, 4/2/10).

Do you have estate planning smarts?

Deborah L. Jacobs (lawyer, award winning journalist, book author) knows how to convey complicated concepts in simple language, and she always gives practical and useful advice.  Her book, Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide, has received acclaim from many, including the Wall Street Journal and Professor Gerry Beyer.

Wall Street Journal: "a terrific guide"

The Wall Street Journal called Estate Planning Smarts “a terrific guide."  On February 20, 2010, the WSJ had a section, The Best In…, that highlighted "some of the most interesting and valuable resources . . . in four key areas: personal finance, health, travel and lifestyles.”  This section featured Estate Planning Smarts:

Estate Planning: We regularly receive questions from readers about estate planning, a difficult topic at best. For good answers and advice, turn to a new book: "Estate Planning Smarts." Written by Deborah L. Jacobs, a lawyer and journalist, it's a terrific guide for people who are just beginning to grapple with estate planning, as well as those who have (or think they have) their affairs in order. Ms. Jacobs does a deft job of handling key topics—bequests, taxes, trusts, insurance, nest eggs, family businesses and real estate, among others—in 19 concise chapters. Her "to do" lists are especially valuable.

Prof. Gerry Beyer: "a great book"

Estate Planning Smarts was reviewed recently on Wills, Trusts & Estates Prof. Blog -- New Estate Planning Book Published (2/18/10).  Prof. Gerry Beyer wrote that Estate Planning Smarts is “a great book”:

Deborah Jacobs uses her prior years experience of writing in this field to create a book that really is practical, user-friendly, and action-oriented. Because the book uses an easy-to-read format, explains complex topics simply, and prompts the reader to think about and organize for effective estate planning, Estate Planning Smarts is a great book for estate planners to make available to new clients in need of basic information.

Hani Sarji: "excellent book"

I reviewed Estate Planning Smarts in a post on December 24, 2009.  I described it as an "excellent book." Estate Planning Smarts has been my companion because it is well written and helpful.

Keeping Current

To keep readers current between editions, Jacobs issues updates that can be downloaded from her book's website www.estateplanningsmarts.com and tweets at http://twitter.com/djworking.

 

What is “inheritance powder”?

It is a euphemism. What does it mean? I invite you to read Prof. Gerry Beyer's post on Wills, Trusts & Estates Prof Blog: "Inheritance Powder". "[E]vil individuals" looking for an alternative to throwing mama off the train might be interested in reading this post.

Article by Prof. Ira Mark Bloom on federal estate tax apportionment

A January 8, 2010 post -- Reforming & Unifying Estate Tax Apportionment Rules for Wills & Revocable Trusts -- Professor Gerry Beyer informed readers of Wills, Trusts & Estates Prof Blog that "Ira Mark Bloom(professor of law, Albany Law School) has posted on SSRN his article entitled Unifying the Rules for Wills and Revocable Trusts in the Federal Estate Tax Apportionment Arena: Suggestions for Reform, 62 U. Miami L. Rev. 767 (2008)." 

Deborah L. Jacobs, what you need to know and do in 2010 to respond to the changing federal estate tax

On January 5, 2010, CBS Money Watch published Estate Tax: What You Need to Know for 2010, by Deborah L. Jacobs (lawyer, journalist).  This article is very well written.  Jacobs deftly navigates readers through difficult concepts and presents them in plain English.

The opening paragraph provides a good summary of the problems created by Congress:

At first glance, the failure of Congress to plug the 2010 estate tax loophole appears to be good news for children of ailing rich parents — and of little consequence to everyone else. But in fact, by letting the tax lapse, Congress has created a bunch of unintended consequences and increased the chances that you will owe taxes on an inheritance. Yes, the perverse result of the disappearing estate tax is that some people of lesser means may owe capital gains taxes on inherited assets. What’s more, since many wills and trusts are written on the assumption that the estate tax exists, a will that made sense last year (or any other year, for that matter) could result in your surviving spouse getting shut of your estate.

The rest of the article tells readers information that they need to know and it also tells them what to do.  Here is an outline of the topics Jacobs discusses:  

The Basics

What's Next?

Steps to Take Now

• How good are your records?
• Are there "formula clauses" in your estate planning documents? -- with a subsection: What's a bypass Trust? (And why need to worry about it)
• Do you have the resources to transfer large sums of money while you are alive?
• Would you like to provide a financial cushion for your grandchildren in the years ahead?

Give Your Estate Plan a Checkup

• Confirm that you have a durable power of attorney.
• Review beneficiary designation forms.
• Consider converting a traditional IRA to a Roth IRA.
• Watch out for state taxes.
• Use trusts as needed.
• Build a legacy.

Jacobs discusses each of the points above and concludes by writing, "Whatever might be happening in Washington, no one should postpone the necessary steps.  Just because Congress is inefficient and disorganized doesn't mean that you must follow suit."

I have a penchant for practical articles that are written in plain English, and this article is certainly one of them.  I will be giving this article to people so they can start thinking about what they need to know and do to respond to the changing federal estate tax.

Jacobs is the author of Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide.  I am currently reading this book and I highly recommend it.  See here.  

Professor Gerry Beyer has also posted about Jacobs's article: Understanding and Reacting to Estate Tax Changes in 2010, Will, Trusts & Estates Prof Blog (1/6/10).

For my posts referring to Deborah L. Jacobs, see here; and for my posts referring to Prof. Gerry Beyer, see here.