Not estate planning, but planning for the stateBlog added by Steve Savant on September 19, 2011
Steve Savant

Steve Savant

Scottsdale , AZ

Joined: January 28, 2005

My Company

Estate planning for uncertain times

There appears to be an environment of estate planning paralysis. The fiduciary community, made up of tax attorneys, CPAs and trust officers, are taking a wait and see approach to estate planning. The 2010 Tax Relief Act temporarily raised the exclusion amount to $5 million and delayed real legislation until the end of 2012.

Some states shadowed the 2010 Tax relief Act, but most states adjusted their own exclusions much lower than the federal law. So it’s not about the federal estate taxes. It’s about state transfer taxes.

The tax liability in most states is significant, as states scrabble to raise revenue. And it’s always easier to tax the dead than it is to increase taxes on the living. The current estate planning paralysis has the fiduciary community lulled to sleep, and it’s time planning professionals wake them up to the realities of state estate tax exposure.

The leverage and flexibility of life insurance

The cost of life insurance premiums continue to decrease in the midst of the greatest mortality revolution since Methuselah. The death claims on survivorship alone remain marginal.

No one debates the economy of scale that life insurance can deliver. But the flexibility of the new, state of the art life insurance framework provides mortality modifications by design. The actuarial mechanics have installed a planning maneuverability to alter death benefit coverage or cash accumulation liquidity riders for buyer’s remorse.

The contractual maneuverability should set the fiduciary mind at ease and it needs to. State tax exposure can have a dramatic effect on the erosion of an estate. Speaking of exposure, fiduciary inaction may place clients in a precarious position and inadvertently result in a practice liability.

Affluent clients, who have accumulated wealth, also may have spent their health in their business pursuits. The fiduciary community may be playing a waiting game on Congress, but their clients in the doctor’s waiting room can’t wait. Any delay can be costly … costly for everyone.

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