In the movie Scarface, Al Pacino inhospitably quips, “Say hello to my little friend!” He could easily have been introducing the new healthcare tax.1 Estate planning attorneys, financial advisors, trust officers and certified public accountants attend innumerable seminars, some lasting up to a week, to strategize on how best to save their clients from dreaded gift and estate taxes. However, the new healthcare tax also deserves special attention because it’s efficiently attacking their clients’ wallets now.
Percolating out there in estate planning since 1984 has been the concern about retitling assets to allow the funding of the credit shelter trust at the first spouse’s passing. With the estate tax exclusion reaching $600,000 in 1984, planning often required a retitling of assets from one spouse to another to ensure that when the first spouse passed away, there would be sufficient assets to fund that spouse’s credit shelter trust.
During the Revolutionary War, a group of soldiers was ordered to raise a heavy timber which the enemy had used to block the road. They could scarcely lift it from the road. A young corporal stood by, urging the men to lift hard, and shouting, “Now boys, right up!” With each subsequent failure to move the immense timber, the corporal’s commands sounded more and more severe. A superior officer passing by observed the efforts of the men and the sharp commands of the corporal. He rode up to them, dismounted, and lent his own strength to the task, lifting with the men. When the timber was in place, the officer asked the corporal why he did not help with the task. “Why, I am a corporal,” he replied. “I am George Washington,” responded the officer.
The 401(k)s and IRAs are commonplace. They are simple to establish and many clients have them. And while most account-opening forms are understandable and seem innocuous, naming the beneficiaries of retirement accounts is often not straightforward.
At first glance, the idea of managing a Twitter account, writing a blog, and managing a LinkedIn account can appear overwhelming, confusing and dispensable. It is easy to think that time is better spent billing and relying on more traditional marketing techniques than entering into the world of social media.
Income producing real estate is a valuable asset class for a diversified portfolio because of its potential for high (and stable) current yield, inflation protection and, more importantly, diversification.
Much has been made recently of professional athletes, like Phil Mickelson, considering fleeing less favorable state tax jurisdictions. Many clients will wander the country, and even the globe, in search of jurisdictions willing to tax less of their incomes or estates. Many states have imposed ever-higher taxes, resulting in a new migration of clients prepared to wander from their old place of domicile to a new, less-taxing place.
The First District, in an opinion last year, effectively nullified – perhaps inadvertently – an element of the Prudent Investor Rule in Illinois. The ramifications are still being felt, but trust counsel and practitioners alike must be on notice: the duty of a trustee to remain impartial when investing marital trust assets has been eviscerated by Carter v. Carter. An investment solely in tax-free municipal bonds for an entire trust was upheld without dissent in a ruling that was not filed under Rule 23.