Re-energized

Its been a tough month. Eight clients passed away in the past six weeks, so things have been hectic, tax season upon us, and of course the usual work load. There is still no Estate Tax bill out of either house of Congress. The President proposed in his 2011 Budget to reenact the Estate Tax with a $3.5 Million Unified Credit Exemption per person ($7 Million per couple) with a 45% rate. The Senate has a bi-partisan proposal at $5 Million per person ($10 Million per couple) with a 35% rate. Stay tuned.

No excuses just facts. Okay back to Grandma tomorrow.

The Note

When Becky entered her mother’s house, she saw a note on the kitchen counter. “Dear children, I know you are grieving and by now are probably wondering what happened. Yes, I killed myself by car accident to save you estate taxes. There are several things you need to not do. 1. Don’t apply for any life insurance benefits. They won’t pay and will order a coroner’s inquest. 2. Destroy this letter. Don’t save it for posterity, it will only cause you grief. 3. Know that I did this because I love you.”

Becky cried. No amount of money was worth her mother’s life. None. She dutifully destroyed the letter by lighting it on fire in the kitchen sink and washing the ashes down the garbage disposal.

Death

At 11:25 p.m., her heart stopped. The doctors tried to revive her, but at 11:35 p.m. she passed away. The doctors informed her children of the results. “We tried, but her injuries were just too great”.

On January 4, 2011, Laura Holden looked at what was left of Beatrice’s body on her autopsy table. Clearly consistent with a car accident. She took some toxicology screens and found no evidence of drugs or alcohol. She looked at the death certificate signed by the doctor and saw as the third cause “Possible Suicide” and the time and date of death. She shook her head, suicides were always the worst from auto accidents because that meant a coroner’s inquest might be requested by an insurance company.

Jaws of Life

After touching his stethoscope to her cool skin and heard the faintest of pulses. Here it was 4:50 a.m. on New Year’s Day, 2010, and he’s out in the freezing cold. He doubted that she would survive removal from the car, but they now had to try. He did a roadside blood typing and hooked her up to an IV of type O plasma. After an hour of jaws of life, reciprocating saws with diamond bits, they got Beatrice onto a stretcher and helicoptered her to a shock trauma unit. Needless to say the road was a huge back-up at 7:00 a.m. rush hour. At 7:30 a.m. she arrived at the shock trauma unit. She needed a transfusion, she lost both legs, the had massive bone damage, which would require surgery and her pet scan showed only slight brain activity. The doctors called her children and advised them that she was critical and that there was little hope and did they want the hospital to go to extraordinary means to save her life. Unaware of her estate planning views and with no Advanced Medical Directive, out of love and care for her, they ordered the doctors to try and save her life. After 10 hours of surgeries, she was still in critical condition.

HAPPY NEW YEARS!!!

Well its now 2010 and today there is no estate tax. There is no guarantee that Congress will not retroactively pass one that might pass Supreme Court muster. So, despite the possible tax savings for a person worth over $1.0 Million who dies in 2010, if these savings get cancelled out retroactively, you’ll still be dead. So spend your wealth, and enjoy the New Year. We’ll return to the perils of Granny tomorrow.

Suppose Decedent dies on January 1, 2010 and has what’s known as a formula clause which leaves the “maximum amount that can pass tax free” to a family style trust for the benefit of the husband and children. Now, consider Congress retroactively changes the law changing that amount to $3.5 Million. Now as of January 1, 2010, what is the trustee of the trust entitled to receive, all of decedent’s estate or $3.5 Million. Does he need to disclaim? Is he taxed on the entire amount if he funds that trust immediately? Lots of questions and unfortunately no good answers.