Get Your Discounts Before They Are Gone

The IRS is talking rule changes again.  It may be time to take another look at your estate plan.

Family-owned businesses often gift ownership interests in the business to younger generations in an effort to reduce gift or estate tax liability.  The reported tax value of those gifts is discounted to reflect the fact that the new owners lack the ability to control the business and cannot market the interest to other buyers.  The IRS now thinks it may be time for that practice to end.

The WSJ has recently reported that the IRS may soon greatly restrict or even disallow those discounts for family businesses. Exactly how and or when the IRS will inhibit discounts is still uncertain unclear, but, if the agency does act, the impact will be substantial.  Have you considered how such a change might impact you and your family?  Call the estate planning attorneys at SYK today to see how the proposed change affects you.

A growing “epidemic” of dementia

Leaders from the Group of Eight (G8) industrialized countries are met last week in London for a special summit on a rapidly growing problem: dementia. Dementia is a medical disorder affecting cognitive function. It includes Alzheimer’s, vascular dementia, dementia with Lewy bodies (DLB), fronto-temporal dementia, and a variety of others that impact patient memory, thinking, and even behavior.

As reported by Reuters recently, the disorder currently affects an estimated 44 million people worldwide, but health care experts expect that number to more than triple to 135 million people by 2050. G8 leaders are now meeting to discuss the rapidly growing costs associated with the disease. Treatment costs already exceed more than $600 billion, or about 1.0% of global GDP. Costs the G8 likely won’t be talking about though are the growing legal expenses associated with trying to enforce or defend estate plans of dementia patients.

A diagnosis of dementia can cause significant legal problems. Even a hint of incapacity makes an estate plan vulnerable to court challenge, threatening the decedent’s intended distributions and forcing his or her family to go through stressful and often expensive litigation.

With dementia on the rise, it’s now more important than ever to make sure you have a clear and effective estate plan in place. If possible, you should put a final plan in place before capacity becomes an issue. If it’s too late for that though, there are still things you can do; just be sure to consult a litigation attorney as part of the planning process. Acting now could save you and your family a great deal of heartache (and money) down the road.

A Tale of Two Wills

What do you get when you mix a reclusive heiress with a will disinheriting her closest relatives? Unfortunately, litigation.

The story of Huguette Clark, reclusive daughter of a copper magnate and former United States Senator, should serve as a cautionary tale for everyone; even those with an estate worth significantly less than her estimated $300 million.

As reported by the New York Times, Huguette executed two wills in 2005. The first left the bulk of her estate to her closest relatives. The second, executed just six weeks later, cut out her relatives entirely, leaving gifts instead to her goddaughter, doctor, accountant, lawyer, and a foundation for the arts (among others).

Executing such vastly different wills in such a short period of time left the door wide open to legal challenge. Each side now has to develop their own narrative for what happened, painting dueling images of the reclusive heiress: a resolute millionaire vs. a vulnerable invalid. Was she a stubborn, strong-willed individual that had been jaded by “minimal contacts” with her family? Or did doctors, nurses, lawyers, and accountants isolate and exploit a vulnerable 104 year old woman? The outcome of the case is uncertain. What is certain is that the “dirty laundry” of what was once one of America’s richest families will now play out in the public arena.

It didn’t have to be that way. Better planning could have significantly reduced the likelihood of claims for undue influence and/or diminished capacity.

The lesson? Consulting with litigation attorneys as part of the planning process can sometimes help prevent litigation.

Click here to read the full NYT article.