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Even if you have a will and trust, an improperly planned estate can pay as much as 45% in taxes to federal and state governments (in the state of Colorado; other states have different rules). We create estate structures which allow clients to minimize the transfer of their wealth to entities or people other than the client’s family or designees. These estate structures will become even more important as we transition through the various stages of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). Unfortunately, EGTRRA includes a sunset provision. This provision provides that the changes in the tax law created by EGTRRA will not apply after December 31, 2010. Essentially, under the current law, estate and generation-skipping transfer taxes will only be repealed for a twelve-month period beginning January 1, 2010 and ending December 31, 2010. Because the repeal of the estate tax is largely contingent on a budget surplus (which has not been the case for several years), this sunset provision allows Congress today to evaluate the state of the budget and decide whether repeal of the estate tax is prudent. While a deal between Republicans and Democrats to make a large portion of the tax cuts permanent looked likely in 2005, the deal fell through at the last minute. If the estate and generation-skipping transfer taxes are to be permanently repealed, sometime before 2011, Congress will have to affirmatively re-repeal the taxes. If Congress does not take any action, then on December 31, 2010, the estate tax repeal provisions “sunset”, and on January 1, 2011, the estate and generation-skipping transfer taxes are reinstated, with the terms and provisions of the tax law effective in 2001. If you thought the need for planning ended with the 2001 law, you may not understand the nature of those changes, as well as the fact that ALL of the changes go away effective 2011...assuming Congress does not change the whole system earlier as they seek more cash for the costs of the war on terrorism arising out of the terrorists attacks on September 11, 2001.
Through our Firm’s estate planning, we can decrease much of the estate costs (including taxes) chargeable to clients with different types estate planning (or worst case, no estate planning at all). Additionally, these structures can minimize the client’s professional liability risk, provide income tax planning, and provide heirs with significant protection from all forms of liability, including divorce. Some of the legal structures that can accomplish these objectives are:
- Family Limited Partnerships and Limited Liability Companies formed in jurisdictions that protect clients as much as possible from liability, allowing clients to control their assets and distributions coming from those assets.
- Tax-Exempt Planning, which provides significant income tax deductions while providing a legacy to charitable causes and the client’s designated heirs.
- Trusts, including conservatively structured offshore entities (if needed) to protect clients (particularly professionals, entrepreneurs & other high-net worth individuals) from unnecessary liability in our litigious society.
- Corporations.
- Pre-tax planning for small, closely-held businesses.
- Asset Protection Planning, including the formation of entities in one of the handful of states where state legislatures have removed the discretion of trial judges in that state from removing the entities' assets from inside the entity. This maximizes our clients' liability protection.
Our Firm has a short seminar on estate planning which our attorney can conduct for large or small groups for a nominal fee. Having the right information, combined with proper planning, prevents problems in the future.
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