Can you remember what you were doing in your early 20s? Can you imagine what kind of life you’ll be living in your 70s or 80s? We experience incredible changes as the decades roll by—not just to ourselves, but in the world at large. With our lives changing so much, our estate planning documents and strategies should hardly remain static. Here is a guide to how your estate plan may or may not evolve through the decades.

In Your 20s: You’re young, just finishing school and starting in your career, unlikely to be married yet… the last thing you’re thinking about is estate planning! At this time of life, who gets your “stuff” may not be as important as who will make your decisions. Choosing your financial and healthcare agents and creating your power of attorney and healthcare directive are the important things to do at this time.

In Your 30s: Marriage, children, home ownership—most of these things happen in your 30s, and your estate plan should reflect that. Now is the time to choose guardians for your young children, decide with your spouse how your joint property will be distributed, and get serious about life insurance.

In Your 40s: This is when your strategy may switch from simple direction of inheritance to more serious asset protection. You’ve worked hard and saved, and you’ll want to think about the best way to maximize your assets with trusts and tax planning.

In Your 50s: As your children start to become independent you may have more freedom with your income. Some people choose to create charitable trusts, some prefer to invest for retirement, and still others decide it’s time to take a risk and start over with a second career. Your estate planner can advise and help with all of these.

In Your 60s: Ah retirement! Making the big change from work to retirement means making changes to your estate plan as well. If you’ve been keeping up with your planning through the decades all that is required now will be some basic maintenance; changes to account for marriages of your children, the birth of grandchildren, and your own relocation to someplace warm and sunny. But beyond the basic maintenance, you may want to start doing some simple Medicaid and long-term care planning—just in case.

In your 70s and Beyond: Health is the key word now. Our life-spans are getting longer, but so are our illnesses, you need to be ready. Tighten up your estate plan, invest in long-term care insurance, and although it may sound morbid, talk to your doctors and family about your end-of-life decisions.

The life alterations that come over a span of decades are difficult enough; you don’t want to have to find a new lawyer every time your circumstances change. Our firm makes it our business to keep up with you at every stage.

“The best laid plans of mice and men often go awry.” Although we hate to admit it, this statement will also sometimes apply to estate planning; and more often than we would like, it happens with powers of attorney.

A power of attorney is the document in which you nominate an agent (or attorney-in-fact) to make financial decisions and take legal action for you when you are incapacitated or otherwise unable. (This does not include healthcare decisions, covered in another document called a health care directive.) Unfortunately, as this recent article on the Elder Law Answers website points out, “many people experience difficulty in getting banks or other financial institutions to recognize the authority of an agent under a power of attorney.”

This difficulty usually has nothing to do with the validity of the document; rather, it is the bank’s attempt to protect itself. But while a little bit of caution is understandable, it can have frustrating—or even tragic—results if not addressed. Luckily, there are steps you can take to improve your chances of having your power of attorney honored. The article mentioned above includes a number of good suggestions:

* Talk to your bank about your plans ahead of time.

* Ask your financial institutions if they have any requirement for powers of attorney, or even their own standard form.

* Update your power of attorney forms or documents frequently (every 2-5 years.)

Talking to a representative from your bank every 2-5 years may seem like an inconvenience now, but imagine the inconvenience if you are incapacitated and your agent is unable to access the funds he or she needs to pay your bills, make your mortgage payment, or provide for the needs of your family. A little bit of time spent now can save a mountain of stress later on.

Coping with the death of a loved one can be a crushing task. There are so many things to do and details to remember; all of this at a time when each small task can serve as a reminder of your loss. At such a time it can be helpful to know that you’re not going through this alone; there are a number of people who can help when you begin to feel overwhelmed. To relieve some of the stress, and help ensure that no important task is forgotten, we offer a list of people to call after the death of a loved one:

Funeral home - This will likely be your first call. The funeral home you or your loved one has selected will be able to help you with a lot of the immediate details and tasks. The funeral director will also be able to help you obtain 10-20 copies of the death certificate, something you will need later.

Family and Friends - This probably goes without saying. Not only will you want to notify family and friends, but they can also help with a lot of the endless tasks and overwhelming details. Don’t be afraid to delegate.

Veteran’s office (if deceased was a Vet.) - If the deceased was a Veteran you may have to stop benefit payments; you may also be able to get assistance with the funeral or memorial service.

The deceased’s employer - You will need to do this not only to inform the employer of the death, but also regarding termination of health insurance.

Attorney or Tax Professional - You will need to know what to do about probating the deceased’s estate, filing tax returns, dealing with bank accounts, etc. An attorney or tax professional can help. It is especially important to find out if your loved one had any existing estate documents.

Office of Social Security - If your loved one was receiving benefits you’ll need to stop payments. You will also want to find out if survivors are entitled to any benefits.

Insurance company of the deceased – You will probably need to file a claim. This is something your attorney or accountant may be able to help with.

Local Newspaper - You’ll want to publish an obituary or notice of death, as well as information about the funeral or memorial service.

Credit card companies and utilities - Give notification of death and pay off any remaining balances.

Bank - Arrange to change any joint accounts or to open an account in your name. Do not close any accounts right away!

Although this list is a good starting point; a complete list of people to call and things to do will depend on where the deceased lived and the details of their estate. Contact your loved one’s estate planning attorney (or your own) to ensure that nothing is left to chance.

Families have a way of acquiring great numbers of treasured objects and mementos: photo albums, antique books, Wedgewood China… a mounted deer head? You just never know what’s going to end up in the trash-heap and what will be kept and passed on to the next generation. Ellen Lupton mentions in her recent article in the New York Times that she and her husband kept the Wedgewood China and (surprisingly enough) the deer head. But the question she puts forth is… why?

Lupton’s article, entitled How to Lose a Legacy, makes the point that the difference between old stuff as trash and old stuff as treasure lies largely with you and how you choose to leave all this stuff to your heirs. “You can’t buy an heirloom at Pottery Barn or IKEA. It comes via gift, bequest or a heated sibling brawl.”

Lupton says early on in her article that “Even folks in the ‘die broke’ crowd, determined to enjoy their remaining assets rather than leave them to the ungrateful grandkids, may secretly hope the family will love and honor their dearest possessions.” But secret hopes aren’t of any use to your children or grandchildren after you’ve passed away. Part of the job of an estate planner is to help you express these secret hopes to your heirs and leave your treasured possessions in safe and appreciative hands.

Of course your heirs are going to have minds (and memories) of their own, and your treasured silver cake platter could still end up in the local antique store; but the best way to keep your treasures in the family is to make sure your family knows your wishes. If they know how much your grandmother’s English tea set meant to you (and why it meant so much to you) it’s going to mean that much more to them.

You may share a life and history with your heirs, but you can’t expect them to read your mind. If you can put your stuff into context—let each heirloom tell a part of your story and reflect a meaningful relationship—the legacy you leave will be priceless.

As many of you know, the 0% estate tax in 2010 is set to expire December 31, 2010, and increase to 55% for those with estates over $1 million.  This Wall Street Journal article by Laura Saunders and Mary Pilon highlights the need for estate planning this year as we head into a new era of the Estate Tax, which is set to effect eight times more tax filers next year:

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It has come to this: Congress, quite by accident, is incentivizing death.

When the Senate allowed the estate tax to lapse at the end of last year, it encouraged wealthy people near death’s door to stay alive until Jan. 1 so they could spare their heirs a 45% tax hit.

Now the situation has reversed: If Congress doesn’t change the law soon—and many experts think it won’t—the estate tax will come roaring back in 2011.

Not only will the top rate jump to 55%, but the exemption will shrink from $3.5 million per individual in 2009 to just $1 million in 2011, potentially affecting eight times as many taxpayers.

The math is ugly: On a $5 million estate, the tax consequence of dying a minute after midnight on Jan. 1, 2011 rather than two minutes earlier could be more than $2 million; on a $15 million estate, the difference could be about $8 million.

Of course, there is a “death incentive” whenever Congress raises the estate tax. But it hasn’t happened in decades; the top rate has held steady or fallen since 1942, according to tax historian Joseph Thorndike of Tax Analysts, a nonprofit group. In fact, the jump from zero to 55% would be “the largest increase in a major tax that we’ve ever seen,” Mr. Thorndike says. That possibility presents a bizarre menu of options for wealthy older people—and their heirs. Estate planning was never cheerful, but now it is getting downright macabre, at least for the tax averse.

“You don’t know whether to commit suicide or just go on living and working,” says Eugene Sukup, an outspoken critic of the estate tax and the founder of Sukup Manufacturing, a maker of grain bins that employs 450 people in Sheffield, Iowa. Born in Nebraska during the Dust Bowl, the 81-year-old Mr. Sukup is a National Guard veteran and high school graduate who founded his firm, which now owns more than 70 patents, with $15,000 in 1963. He says his estate taxes, which would be zero this year, could be more that $15 million if he were to die next year.

Advisers say the estate-tax dilemma is especially awkward for heirs. “At least in December 2009, people wanted to keep their relatives alive,” says Ronald Aucutt, an estate-tax attorney with McGuire Woods in the Washington area. Now he and others are worried that heirs may be tempted to pull plugs on Dec. 31. Economists might call the taking of a life to reap a tax advantage a “perverse incentive.” District attorneys might call it homicide.

Taxpayers trying to cope with such surreal situations need to understand how they came to be. The roots go back to 2001, when Congress cut the estate tax rate to 45% from 55% and increased the exemption gradually over a decade. From its 2001 level of $675,000, the exemption rose to $3.5 million per individual by 2009. Thanks to legislative sausage making, the rules got extreme after that: The tax disappeared altogether in 2010, but was programmed to revert in 2011 to a $1 million exemption with a top 55% rate.

Few Washington insiders expected Congress to allow the tax to snap back so sharply next year. So why, with nine years to act, didn’t it fix the problem? Political wisdom holds that estate tax changes can’t happen in election years for fear of angering voters, and Hurricane Katrina derailed a 2005 fix. Late last year, the House of Representatives passed an extension of the 2009 estate tax, but the Senate didn’t act.

Compounding the problem, lawmakers didn’t hammer out a fix early this year, as many had expected. Extending the 2009 law retroactive to the beginning of 2010 would have made a seamless transition and resolved issues taxpayers are now facing. Instead, the estate tax has been in limbo all year. Senators are divided among three possible solutions. Some favor the pre-Bush rate of 55%, while others advocate a 35% rate (with a more generous exemption). A third group prefers the old 45% rate. Many Washington insiders are betting Congress won’t act this year because of an overflowing to-do list, the fall election and fewer than 40 working days left in 2010. At least one near-deal has failed the Senate this year. Pressure to act will likely grow following the November elections, when Congress is expected to address many other expiring Bush-era tax breaks, including income taxes and capital-gains rates.

Meanwhile, the living and their relatives face a complex calculus with unknown variables. The Internal Revenue Service has yet to issue guidance explaining current estate-tax law, and no one knows if Congress will include retroactive elements when members deal with the tax. “Not only is the future uncertain, but the past is also. We have no idea what the law is,” Mr. Aucutt says. So far in 2010, an estimated 25,000 taxpayers have died whose estates are affected by current law, according to the nonpartisan Tax Policy Center. That group includes least two billionaires, real-estate magnate Walter Shorenstein and energy titan Dan Duncan.

Another unknown is whether—assuming lawmakers act—changes will be retroactive to the beginning of 2010, and if they will be mandatory. Experts say a pure retroactive extension might be constitutional, but they doubt one is feasible at this late date.

“Enough very wealthy people have died whose estates have the means to challenge a retroactive tax, and that could tie the issue up in the courts for years,” says tax-law professor Michael Graetz of Columbia University. Whatever the outcome, few see the zero-tax regime persisting for very long because of the nation’s stratospheric debt and deficits. “I don’t see how Congress can get out of this without creating winners and losers,” says Beth Kaufman, an attorney at Caplin & Drysdale in Washington.

Estate planners and doctors caution against making life-and-death decisions based on money. Yet many people ignore that advice. Robert Teague, a pulmonologist who ran a chronic ventilator facility at a Houston hospital for two decades, found that money regularly figured in end-of-life decisions. “In about 10% of the cases I handled at any one time, financial considerations came into play,” he says.

Struggling to Live

In 2009, more than a few dying people struggled to live into 2010 in hopes of preserving assets for their heirs. Clara Laub, a widow who helped her husband build a Fresno, Calif., grape farm from 20 acres into more than 900 acres worth several million dollars, was diagnosed with advanced cancer in October, 2009. Her daughter Debbie Jacobsen, who helps run the farm, says her mother struggled to live past December and died on New Year’s morning: “She made my son promise to tell her the date and time every day, even if we wouldn’t,” Mrs. Jacobsen says.

In New York the lapsing tax spawned a major family conflict, according to one attorney. As a wealthy patriarch lay dying at the end of the year, it became clear that under the terms of the will his children would receive more if he died in 2010, while his wife (not the children’s mother) stood to benefit if he died in 2009. The wife then filed a “do not resuscitate” order and the children challenged it. The patriarch lived a few days into 2010, but his estate, like Mrs. Laub’s, remains unsettled given the legislative uncertainty.

Mr. Aucutt, who has practiced estate-tax law for 35 years, expects to see “truly gruesome” cases toward the end of the year, given the huge difference between 2010 and 2011 rates. Without knowing what the estate tax is, has been or will be, advisers say it is difficult to offer counsel that applies broadly, as techniques that work under one version of the law backfire in others. Whatever happens, advisers say people who might be affected should take a careful look at their power-of-attorney documents. Under last year’s law, large gifts before death sometimes made sense, depending on the state of residence. This year they could be a terrible move.

Advisers also suggest paying attention to health-care proxies. Who will be making choices, using what factors? Anne L. Stone, an attorney in McLean, Va., has an elderly female client who recently instructed her to write a provision into a health proxy directing her children to take estate taxes into account when making end-of-life decisions.

What about the options for taxpayers who are so eager to reduce their heirs’ tax burden that they are considering ending their lives? Three states—Oregon, Washington and Montana—allow versions of the practice. Oregon’s law took effect in 1997 and Washington enacted a similar one in 2009. Montana’s Supreme Court recently ruled that nothing in the state constitution prohibited doctors aiding patients with dying, but voters haven’t yet specifically authorized it.

‘Suicide Tourism’

Still, states strongly discourage what’s becoming known as “suicide tourism” with elaborate residency and documentation requirements.

Similarly, some countries, such as Switzerland and the Netherlands, have long allowed physicians to aid patients in dying. But only Switzerland extends this benefit to foreigners.

Doctors and hospice professionals, meanwhile, say moving terminally ill patients to places with so-called aid-in-dying laws is usually a bad idea because it adds stress at an already difficult time. “Many people are thinking about [the estate tax], but the truth is that committing suicide is not a normal way of ending your life,” says Porter Storey, vice president of the American Academy of Hospice and Palliative Medicine.

The uncertainty of the legislation is causing stress even for relatively healthy taxpayers like Art Nickel, who is 78 and lives in the Denver area. He owns a substantial sum in low-cost stock accumulated during a 35-year career as an IBM systems engineer. Like Mr. Sukup, he started with nothing and worked his way up, putting himself through the University of Wisconsin and serving in the Air Force.

“I plan to keep living,” Mr. Nickel says, “but I don’t know how to plan until Congress straightens this mess out.”

Vicki Needham posted the following article yesterday at the Hill.com in regards to recent developments in the Senate concerning the estate tax:

An agreement has fallen apart on an estate tax proposal that had appeared resolved between Senate Democrats and Republicans, a lead negotiator said Tuesday.

Senate Minority Whip Jon Kyl (R-Ariz.) said the accord, which was all but forged a week ago, began to dissolve Monday night and broke down Tuesday after talks between leaders in both parties.

After talks with Senate Finance Chairman Max Baucus (D-Mont.) and Senate Minority Leader Mitch McConnell (R-Ky.), they scrapped a plan to move forward with the tax that expired at the end of 2009.

The reasoning, Kyl said, is that Senate Democrats aren’t allowing any legislation to reach the floor that doesn’t have support from the majority of its members.

“We no longer have an agreement because the Democratic side has decided that unless a matter has a guaranteed majority of Democratic votes going in, they’re not going to allow it on the floor, at least not voluntarily,” he said. “So we have to find a way to get a reasonable permanent estate tax reform to the floor where members can vote on it.”

The agreement was being worked out among Sens. Chuck Grassley (R-Iowa), Blanche Lincoln (D-Ark.) and Baucus, among others, on specific terms and details on offsets, Kyl said.

Kyl hasn’t disclosed the proposal’s details, but sources have told The Hill that lawmakers were looking to give taxpayers the option of prepaying their estate tax. The levy would be set at 35 percent for those worth more than $3.5 million. However, the exemption would ultimately increase over time to $5 million and wouldn’t be indexed for inflation. Prepayment trusts would pay a lower rate.

The proposal was expected to be fully compliant with pay-as-you-go rules.

It was unclear how the gift tax would be addressed but Kyl has said he would like the rate to mirror the estate tax.

The House recently passed legislation creating a 45 percent tax on estates worth more than $3.5 million.

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Stay tuned for further updates as the situation develops…

The recession has apparently kept even more Americans from completing any basic estate-planning documents — a will, trust or financial/medical powers of attorney, according to a December survey by Lawyers.com. Only 51 percent of adults reported they had such estate-planning documents, compared with 64 percent in 2007.  Most cited their need to focus on paying bills and other “essential” money priorities, the survey said. This article discusses the family feuds that can happen when no estate planning occurs, and the importance of talking to your family about your estate plan as you begin to get your estate plan in order.

A trust is the single most effective estate planning tool available. There are many different types of trusts. Among the better known and more commonly used are revocable living trusts, irrevocable trusts and testamentary trusts. In addition to protecting your privacy, a trust will help you leave what you want, to whom you want, in the way you want—at the lowest possible overall cost.

A Living Trust is a document created by you and your estate planning attorney to manage your assets and wealth as you see fit when you are no longer around to do so.  There are many benefits from creating Living Trust, including minimizing tax liability, promoting certain behavior from the next generation, protecting assets from creditors and judgments, and many other benefits.  The Living Trust also avoids probate, which we all know is a long expensive process that exposes all of our private affairs to the public domain of the court system.  Assets held in trust pass without being subject to probate, so your estate can save the money that would normally get spent during the probate process, which can add up to several thousands of dollars. Probate can also be a long process, taking over a year to complete in some circumstances. This blog article discusses the increasing delay assocaited with Probate as the courts continue to cut costs, have days of furlough and experience other delays, all contributing to the time  spent in the probate system.

Here are some pointers made by the California State Bar on the use and need of Living Trusts in California.

So says Representative Sander Levin. Ryan J. Donmoyer of BusinessWeek writes here that Congress may get to extending the Bush erea estate tax rate next month.

Excerpt from the article: Levin said the committee would begin work to retroactively reinstate a federal tax on multimillion-dollar estates that expired Dec. 31. The legislation would likely seek an extension of a 2009 law, which applied a 45 percent tax rate on the value of estates that exceeded $3.5 million per individual.

“The sooner we do it, the better,” Levin said. The lapse of the levy and a complicated capital gains tax that replaced it was making it hard for families to plan their affairs, he said.

What a mess Congress has created! We are now in a year where there is no federal estate tax – but hold the cheers.  Congress has substituted another method of taxation that will collect more taxes from many of our clients and families than the estate tax.  Additionally, as has been reported in the local and national press,[1] these changes will, for some, greatly alter the planned for and anticipated distributions among family members and heirs.

A brief review of the law will help explain why this is so significant.  The 2001 tax act, signed into law by President George W. Bush, gradually reduced the maximum rate of the federal estate tax (and the equally onerous generation-skipping transfer tax on transfers to grandchildren) from 55% to 45%.  It also gradually increased the amount of property that you could pass free of federal estate tax from $675,000 per person in 2001 to $3.5 million per person in 2009.  That means that with basic estate planning, a married couple could pass up to $7 million free of federal estate tax, if they both died in 2009.

Then, in 2010 only, the 2001 tax act repeals the estate tax.  But like a horror film character who just won’t die, under the existing law the estate tax returns again on January 1, 2011 – only at a much lower $1 million exemption and a higher maximum 55% tax rate!  This strange “now it’s gone, no it isn’t” effect is the result of a rule in Congress that attempts to limit budget deficits.

Paying for Estate Tax Repeal

To pay for this one-year vacation from the estate tax, Congress replaced the estate tax with an increased income tax.  Before 2010, any assets that pass to someone when you die would be valued at fair market value at the date of death. Thus after death, when a surviving spouse or heirs sold any assets (like securities or a home) that had increased in value, they would not have to pay income tax on any of that growth that occurred during your life.  (This is referred to as a “step-up in basis.”) For many heirs this means huge income tax savings, oftentimes tens of thousands of dollars or more.

But in 2010 property that passes at death does not automatically receive this step-up in basis.  Instead, each individual has a limited amount of property that can be “stepped-up” in value at the time of death.  Property that does not receive this step-up value will be subject to tax on all increase in value from the date you first acquired the property. This means that the property could be exposed to tens of thousands of dollars of income tax liability for your heirs!

Not surprisingly, these rules are convoluted and in many cases very different from the old law.  In fact, Congress attempted to institute a similar tax structure in the 1980s and it was repealed, retroactively, because it was too difficult to administer.  Because of past experience as well as the anticipated difficulties in calculating such a tax, the common belief was that Congress would change the law before January 1, 2010. But it didn’t.

How You Are Affected?

This law can affect you in several ways.  For married couples as well as single clients, we need to first make sure that your property will be divided according to your desires, and not dictated by Congress. For more than 50 years it has been common to use a written mathematical formula to divide the assets of a married couple when the first spouse dies to maximize estate tax savings. Likewise formulas have been used to provide funds for charitable causes and to benefit family and friends. Now, in 2010 when there is no estate tax, these formulas will not work. If a spouse is not your sole beneficiary (for example, if you have children from a prior marriage), the existing formula could result in the disinheritance or substantial reduction of resources provided for the surviving spouse.

What Should You Do?

You should have your estate plan reviewed and make any changes that are necessary for this law. You need to ensure that your property is positioned to receive the maximum step-up in basis increase available under current law.