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Archive for March, 2010


Friday, March 26th, 2010 by

I’ll bet you had no idea that April 16th is National Healthcare Decisions Day!  Hallmark may not have developed a greeting card to mark the occasion, but highlighting the importance of advance healthcare decision-making is worthwhile.  Hopefully, as a result of National Healthcare Decisions Day, many more people will think about their healthcare decisions and complete reliable advance directives to make their wishes known. 


            Having swift and immediate access to well-drafted healthcare directives in a medical emergency can reduce stress on patients, hospital staff, and most importantly, loved ones.  This is why, as part of our service of providing comprehensive estate plans, we make sure that our clients complete advance healthcare directives, including a Designation of Healthcare Surrogate, Living Will, and HIPAA release. 


            Although we counsel clients to make healthcare decisions before an actual medical emergency occurs and stress the value of having the necessary documents prepared, that is not enough.   We take our commitment to our clients one step further by making sure that our clients’ healthcare directives are immediately available to them, to family members, and to the hospital in an emergency.  We know that clients don’t take their advance healthcare documents after leaving our office and stuff them into their wallet, so they always will be available.  It does not do any good to have beautiful documents sitting in a drawer at home after an encounter with one of Jacksonville’s less skilled drivers results in you being transported to a hospital in an ambulance while unconscious.  This is why we provide to our clients a wallet card that will enable a hospital to obtain the client’s legal directives and other critical medical information around the clock, even if the client can’t communicate.


            One of our goals as estate planners it to help make sure that everyone has protected themselves and the ones they love by completing advance healthcare directives.  National Healthcare Decisions Day helps highlight the importance of advance healthcare decision making.  Celebrate the day by making your healthcare decisions.  Here’s wishing you a stress-free April 16th!

Categories : Newsletter
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The Power of Story-Based Planning – Part 1 – By Scott Farnsworth

Thursday, March 11th, 2010 by

We know that 70% of adults do no estate planning.  One possible explanation for this frightening statistic is that there is a huge gap between what clients want and what lawyers think clients want.  (or what lawyers can deliver!)  To help reduce this gap, I associate with thought leaders like Scott Farnsworth of the Sunbridge Legacy Building.  I am sharing with you one of his concepts which we utilize in our practice.  I would appreciate any comments you may have after reading this article.

The Power of Story-Based Planning – Part 1 – By Scott Farnsworth


Virtually all my “official” training as an estate planning attorney and a Certified Financial Planner has been about numbers. Tax rates, code sections, rates of return on investments, asset allocation models-the unwavering focus has been on something quantifiable. The underlying message always came through loud and clear: unless something can be tallied on a ledger sheet, it isn’t worthy of our professional attention and probably isn’t all that important. Only “numbers-based planning” is real planning.


But my gut-and my real-life experience-told me something different. They told me that when numbers-based planning collided with human beings, i.e., our clients and their children and grandchildren, either the planning was never actually implemented by the clients, or the wheels came off when the planning landed with a thud on the succeeding generations. They told me that the most clever and tightly-wound estate or financial plans could and would be unraveled by the people they were designed to “help” or “protect.” They told that we planners ignore the human issues at our peril, and at the peril of the beautiful numbers-based plans we crank out.

My sense was often that with numbers-based planning, the tax tail was wagging the dog-driving the planning instead of riding in the back seat along with all the other significant but not critical factors. One significant study found that the likelihood of a family-based business surviving into the second generation was inversely correlated to the amount of tax planning the first generation had done. (Correlates of Success in Family Business Transitions, Morris, Williams, Allen, and Avila, Journal of Business Venturing 12, 365-401, 1997) In other words, the tax doctors were actually killing the patients they were hired to “save.”

Numbers-based planning might work if we were planning for robots, but we’re not. We’re planning for real flesh-and-blood people. I recall a series of conversations with a couple from New York City who had spent tens of thousands of dollars for one of the premier law firms in the country to draft a plan to care for their estate and their two teenage children. The plan touched all the legal and tax-planning bases, but in the words of the wife it was “cold and impersonal, not what I want to leave for my children.” The expensive, well-drafted plan was never executed but remained nothing more than a pile of paper, glistening with lawyerly brilliance on the surface but empty and meaningless underneath.

Unfortunately, that couple’s experience is repeated all too often. In my view, such outcomes will not change until we take a fundamentally different approach to this whole business of estate and financial planning. They will not change until we spend more time listening to client stories than tallying up their balance sheets; until we tailor their plans to the human hopes, dreams, and fears imbedded in their stories; and until the plans we create help them tell the story of their legacy-of who they really are and what impact they have had and hope to have on the people and causes they love. I call this approach story-based planning.

Categories : Newsletter
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Tuesday, March 2nd, 2010 by

Let’s look at the impact of the estate tax “repeal” situation.  Clearly, confusion reigns.  Congress continues to be deadlocked on how to approach the estate tax situation.  However, there are three likely scenarios and results for the “repeal” situation.


            The three scenarios which every estate plan must address are:  (1) Congress acts, and passes a law that applies retroactively, (2) Congress acts, and the law does not apply retroactively (or retroactive application is found unconstitutional by the courts), and (3) Congress simply does not act!


            This means that the three most likely results are (1) the 2009 structure is extended.  This would result in a $3.5 Million exemption and a 45% estate tax rate; (2) a $5 Million exemption and a 35% estate tax rate would be in effect, or (3) the former $1 Million exemption with a top rate of 55% is reinstated.  In each case, estate plans must take into account the “gap” period (today’s “purgatory” situation where no estate tax is in effect while we “wait” to find out where we’re going!)


            Unless and until Congress acts, there will be no estate and generation skipping tax.  The gift tax is at 35% with a $1 Million lifetime exemption.  Finally, a new income tax system is installed to replace the revenue lost as a result of the estate tax repeal.  This system features a “carry-over basis” regime.  Under this system, there is no automatic death basis “step-up” as we’re used to.


            Under the 2010 system, estate planning document focus must shift to take into account a system that allows for a $1.3 Million step-up in basis allocation, and for married couples, properly addresses the opportunity to access an additional $3 Million step-up in basis allocation.  Documents must cover the current situation and also account for the potential reversion to the system used in the past.


            What can be done, proactively, about this confusion?  First, you should have your plan reviewed.  There are some situations that are more critical than others, but at least six situations can be improved by being proactive.


            First, any document prepared prior to 2001 would obviously not address issues raised by passage of the law in that year.  Everyone in that situation should have their plans reviewed.


            Second, anyone who dies this year is under the capital gains regime developed to “replace” the expiring estate tax.  If you or a loved one have health problems and are at higher risk of dying this year, you will need to determine the basis of your assets.


            Third, if you have developed a plan informally using the estate tax exemption amount to resolve differing distributions, you are at complete risk.  These plans would likely include blended families and charitably inclined people.  Those plans should be reviewed proactively.


            Fourth, all generation skipping plans should be reviewed so that you can be aware of the impact of the new planning landscape.


            Fifth, if you would be affected by a reduction back to a $1 Million exemption, your plan should be reviewed.


            Finally, documenting your planning intent is critical in changing times like these.  Doing nothing – because the estate tax has been “repealed” – is not recommended.

Categories : Estate Planning
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