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Mark Cornwall: Where Has the Transparency Gone?
‘Twas the night before Christmas and the kids were awake, while mom and dad wondered what final steps they should take.
Specifically, they wondered about the best thing to do financially to put their estate in order before the end of the year. They want their children to get the big bittersweet gift of everything their parents worked for their entire lives — not just the money and distribution of assets, but sentiments of love and thoughtfulness of organization.
The best way to ensure your estate escapes the estate tax law when you die is to spend most of your money before it happens. Not necessarily on yourself, but by gifting tax-free up to $13,000 this year only — as far as we know — to your children, friends or charities. You simply give the money away and make sure your CPA fills out the paperwork to deduct it from your $1 million gift-tax exemption.
Of course, we’re in the middle of the worse global recession since the depression, but if you have the money, it would sure help those in need of it. And you get two gifts: the intrinsic gift of giving, and the self-esteem you receive knowing you’re using the tax laws to avoid the money going to taxes. Isn’t that better than knowing it won’t go to tax dollars spent to bail out banks that won’t give you a loan?
My favorite financial reality is the one where, “If you took greed out of Wall Street, all you would have left is pavement.” So that makes me part of the group of Americans who are the majority that distrust the cozy relationship between investment bankers and Washington. The irony, of course, is that with the bailout money, these investment bankers have made record profits, and they can’t wait to pay back the TARP funds and get back to business as usual. If you know any of them, they’re talking about quadrupling their money over the next few years. Then Washington will be back where it has always been: at their beck and call.
That doesn’t say much for our national legislators, and here it is Christmas. But darn if they didn’t pass a health-care bill — “not a mansion, but a startup house.” Can anyone out there tell me what the startup house is made of? Where is all the “transparency” that was such a clever phrase only months ago?
Legislative transparency is an oxymoron. It was nice to see that the headline “Uncertainty Swirls Around Estate Tax” finally made the front page of the weekend edition of Money and Investing in The Wall Street Journal last weekend, just four days after I wrote about it last week. It was the first article I’ve seen it cover on the subject. It makes all the same points and discusses the difficulty of having to deal with such a law — which will no doubt be retroactive because it’s not going to pass before the new year, leaving estate planners, advisers and executors of those first to go in 2010 without any instruction on how to go forward with the administration of decedent’s estate. This will involve billions of dollars, perhaps wasted.
However, the article takes it one step further when the author, Laura Saunders, quotes estate-tax lawyers and planners who are “shocked and livid”, saying, “We never dreamed Congress would be this irresponsible. ... It is the stupidest policy imaginable. People will die, and executors need to move quickly (as do trustees). But no one knows what the law will be.”
There you have it, as stated in the Bible of current financial affairs. So don’t blame the estate planner, administrator or adviser for not having the answers. Call your congressional representative, and wish him or her a Merry Christmas.
— No opinion herein is a “marketed opinion” and no information provided herein can be used to avoid tax penalties for which the taxpayer would otherwise be responsible. Mark S. Cornwall has lived in Santa Barbara for more than 30 years and practiced law here for 25 years. He is accepting new clients. His book, Estate Planning: The Heroes Way for Baby Boomers, can be purchased via his Web site, www.MarkCornwall.com; Amazon.com; or locally at Chaucer’s and Borders bookstores. To schedule an appointment, contact him at .(JavaScript must be enabled to view this email address) or 805.845.7558.
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» on 12.23.09 @ 10:30 AM
Of course, the concern is not with 2010 per se, rather with what may be passed in 2010 retroactive to January 1, 2010.
Everything being equal, the 2010 estate tax is a dream—it doesn’t exist. Sadly, Congress is likely to make hash of that before long and reinstate an estate tax.
More vexing, perhaps, is the life-time gift tax exemption of $1m which doesn’t change in 2010; but where does it go if Congress changes the rules? Or the Generation Skipping Tax of $2m in 2009.
Mark’s got it right, but these things are, after all, attorney & accountant full employment acts. The only people who really pay aren’t the ones he’s quoting.
» on 12.24.09 @ 01:10 PM
In the spirit of Christmas I won’t disagree with what Mr. Jensen wrote, but I think he missed the point. Crongress’ inability to act is freezing any action by tossing both sides of the same coin. People don’t think about estate planning in fear the law will change their circumstances. While CPA’s and attorneys cannot relieve their fears to encourage action by explaining estate plans are written to cover any law that comes into effect in favor of the client. Therefore, until stability resumes, both sides are taking the hit.
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