Death, taxes and advisers: The skinny on estate rates for 2010

It seems that the sexiest webcast topic we’ve ever hit upon at InvestmentNews is estate taxes.
Yesterday’s webcast on the subject, which featured one of the leading independent estate-planning attorneys in the nation and attorney/wealth management executives from both Wilmington Trust Corp. and U.S. Trust Bank of America Private Wealth Management, drew the largest audience of advisers we’ve ever assembled.
The top-notch panel and skillful moderator (yours truly) aside, the likely reason for the webcast’s success was its timely topic: What happens to estate taxes in 2010 and beyond?
As you know, estate tax rates have been declining in recent years — they’re now at 45% — and the exclusion amount has been increasing, to $3.5 million. In 2010, thanks to the Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax disappears. In 2011, it’s scheduled to return to the 2002 exemption level ($1 million) and the 2001 top rate (55%).
That’s what’s on the books. But as our panel of experts discussed, no one knows what’s going to happen. Estate taxes are likely to rise, for several reasons. First, only a very small slice of the U.S. population is affected by the estate tax. Second, that small slice comprises the nation’s wealthiest citizens, so there will be little popular support for a measure to continue giving rich people a break. Finally, the government is so desperate for money that even the few billion dollars the estate tax produces is better than nothing.
As our panelists discussed what legislators might do, could do and probably will do, I sensed the frustration among adviser attendees through the questions that flowed in. To paraphrase one adviser whose message screamed exasperation, “Tell me what I should do now.”
Our panelists provided some answers, which you can hear if you go to our webcast home page and listen to the estate-planning program. But here are some takeaways:
* Consider using grantor remainder annuity trusts. I won’t go into detail about these wealth transfer structures (for space reasons and because I find trusts and estates bewildering), but today’s low interest rates and the trust’s current short life span may change in the near future. By the way, there will be a column about GRATs by Robert N. Gordon, our Tax-Conscious Adviser columnist, in the next issue of InvestmentNews.
* When your clients have anything remotely related to estate planning to consider, find a competent estate-planning attorney with whom to work. This stuff is so complicated already — and likely to become even more complex — that your clients will thank you a million times over for helping them get their estate plans in order. A lifetime of hard work can disappear as a result of one tiny mistake, so be ultracareful.
• * As panelist Sanford Schlesinger pointed out, one of the most important things a financial adviser can do is to review the beneficiary designations on a client’s life insurance policies, 401(k) plans, individual retirement accounts and any other savings plans or insurance documents, whether under the adviser’s control or not. Most of these are either not filled out or are done incorrectly, he said. A simple beneficiary review may be one of the most important contributions you ever make to the financial well-being of your clients.

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