Any Repeal of Estate Tax Won't Repeal Need for Estate Planning
The battle over whether to repeal federal estate and gift taxes may be a long one. For the moment, the federal estate and gift tax system remains intact following President Clinton's veto of Congressional legislation to repeal the so-called "death taxes." But even if estate taxes are eventually wiped off the books or dramatically reduced under a future Congress and President, that won't eliminate the need for estate planning.
History of the Estate Tax
Throughout the history of the United States, there have been several variations of the estate tax. The first tax was enacted near the end of the eighteenth century to finance U.S. naval expansion during tensions with France. It was repealed, in 1802. The second estate tax arose after the Civil War started and was repealed, in 1870. The third estate tax was implemented near the end of the nineteenth century to help finance the Spanish-American War. It was repealed, in 1902. The current tax was enacted, in 1916, in part to help pay for World War I. Although it has not been repealed since then, it has been modified several times. Even if it is repealed in the near future, it would likely reappear when our government needed more money. It is easy to see that while this tax may come and go, the need for proper estate planning will never go away.
Planning for Your Incapacity
Do you know who will make your personal, health care, and financial decisions if you were to become incapacitated due to injury or illness? Who would make decisions concerning your living arrangements and type of care you would receive? Without proper planning, your loved ones may have to go to court to be appointed as your guardian. A court guardianship proceeding is a cumbersome and sometimes expensive public court proceeding that can be avoided in most cases through proper thoughtful planning.
Your Minor Children
Nothing is more important than one's children, yet it is surprising how many people do not have a plan to insure that their children are taken care of if they die prematurely. Without such planning, the court will decide who raises your children and who handles their finances. In addition, when the child turns age 18, all of your assets will be under the control of the child. Since you are careful to be certain your children have a safe and secure environment when you go out for the evening, why not take the steps to help ensure it stays that way if you don't return?
Protecting Inheritance
Unless specified otherwise, a person age 18 or over will take their inheritance outright. Most people would not want their young-adult children to receive their inheritance outright, but would prefer that another adult friend, relative or professional fiduciary, properly manage it. This not only ensures that the child's needs are taken care of, but protects the child from their own immaturity in wasting the inheritance. This protection can only be achieved through proper planning.
Second Marriage Situations
We are seeing more "blended" families today than ever before. Many couples now each have children from a prior marriage and sometimes children together. How do you ensure that your wealth is protected and passed on to whom you want it to go? Without proper planning you may unintentionally disinherit someone. Feelings may be hurt. Relationships may be ruined. Litigation may ensue.
Family Business Succession Planning
There has been much written about the small percentage of family owned businesses that will survive from one generation to the next. Why is this? It is not because people plan to fail, but rather it is primarily because they fail to plan. They do not properly integrate family and business estate planning into a comprehensive strategy. Although the decisions that must be made are difficult ones, it is only through a thoughtful and thorough approach that your business will have the opportunity to survive.
The need for proper estate planning is not driven by which political party is in control or whether or not we have estate taxes. The need for proper estate planning is ever present. §
