The biggest hurdle facing estate planners is proscrationation.  No one expects anything bad to happen.  Most figure they can wait one more day, one more week, one more month to do estate planning.  Some opt to buy that flat screen TV or go on another vacation rather than to do estate planning.  In fairness, most of the time waiting or putting off estate planning is ok, because nothing happens.  HOWEVER, what if the unthinkable happens, whether it be a death, disability or lawsuit.  Then what? 
 
That is what happened recently to a client of mine.  They were referred by their financial advisor late last year.  They called in December and made an appointment for early January, which they canceled due to some conflict.  They eventually came in for their initial consultation in late February.  I was advised that the wife had cancer and her progronosis was not good.  We immediately drafted their estate planning documents and then tried to get them to come in to sign.  They made an appointment to sign, but then canceled it due to a doctor’s meeting.  We tried again.  Finally, we received a call that she was in the hospital.  We suggested that we go to the hospital to get the documents signed, but by then it was too late, she was not awake.

Unfortunately, she died last week.  The bottom line, no estate tax planning was done, and upon he husband’s death, the children will pay an additional $200,000 of Maryland estate taxes and if Federal estate taxes are restored in 2011, there could be an expected 700,000 of Federal estate taxes when the husband dies.  Moreover, if the husband gets remarried, it is possible that his new wife and family will actually inherit all of the assets.  Or, if he gets sued or goes into a nursing home, all of the assets will be subject to the creditor or nursing home.
 
If they had been able to do the estate planning that was recommended, all of the estate taxes would have been saved, the assets would stay in the family’s blood lines, and the assets would be protected from creditors, nursing homes, etc. 
 
I know how hard it is to plan.  But it is necessary and important to plan now.  Mostly because no one ever knows when it will be necessary and if it is necessary, not planning is a complete and total disaster waiting to happen.

In an advisory opinion issued to the Maryland legislature, Attorney General, Douglas Gansler, issued an opinion on Wednesday that Maryland Courts would likely recognize as married, same-sex Maryland couples who were legally married in other states.  This should provide gay married couples with the same rights and obligations as heterosexual couples.

The exact implications of this decision are unclear, however, the decision may eventually grant same-sex spouses rights to health benefits and an exemption from Maryland inheritances, estate and transfer taxes.  That said, it might also impose obligations relating to child support and alimony, if later divorced.

In the past, Maryland has expanded benefits to those registered as “domestic partners”, but this opinion is much broader and may provide an incentive for same-sex couples in Maryland to get married in another state (that allows it).  It will likely be up to Maryland’s highest court to issue the final verdict on this matter and clarification on what it means.  A very controversial political topic, we will be certain to stay on top of this legislation for our clients.

It is always tragic when someone dies.  In the past couple of months, well known individuals and celebrities have unexpectedly died - Farrah Fawcett, Michael Jackson, Billy Mays and Steve McNair.  It has now become known that Steve McNair did not have a Will or any sort of estate plan.  Besides his current wife and two children, he had two children from a previous relationship.  It is now up to the laws of Tennessee to determine who receives his assets and how and when they are distributed.   Given the probable size of his estate, the IRS may actually be the biggest beneficiary as a result of his death, receiving upwards of 45% of his assets.
 
Most of us do not think we are going to die tomorrow.  This is especially true of athletes.  The lesson that should be learned by these unfortunate deaths is that the future is unknown.  And, while there is a media circus surrounding the death of Michael Jackson, in the end, it will be determined that he created a conservative, private estate plan that will allow for the future wellbeing of his children, mother and others and or charitable causes close to him.
 
The bottom line is no matter how young or healthy you are, no matter your wealth or family situation, estate planning allows you to control who receives  your assets, allows you to determine who makes decisions for you and your young children, allows you to determine how and when your assets are distributed and finally, may prevent the IRS from receiving the lion’s share of your estate.

A financial advisor contacted me recently regarding one of her clients.  A widow died in 2006, leaving her estate to her daughter.  Her estate included US Savings bonds of $350,000, of which $280,000 was interest which she had never paid tax on.  The daughter had the bonds changed to her name, thereby deferring the income tax until the savings bonds matured.  This can make sense, but in this case it did not.  Because the estate was subject to state estate tax, but not federal estate tax, there is no offset against the future interest income for the state estate tax paid.  In other words, there are two taxes on the interest income, state estate tax and federal and state income tax.

A better plan would have been to realize some or all of the interest income on the final income return of the widow.  That way the income tax paid would be a deduction against the assets of the estate, thereby saving Maryland estate taxes AND avoiding the double tax situation. 

This is a classic example of having to pay more tax than necessary because of the lack of proper planning and lack of obtaining professional tax advice after someone died.