Estate Planning: Mistakes or Misunderstandings

Top Estate Planning Mistakes or Misunderstandings – And How to Avoid Them

We have all heard the phrase: nothing in this world can be certain in life, except death and taxes. As an estate planner, I address these two issues every day. I counsel clients on the best strategies to pass their estates to their loved ones, how to efficiently manage their affairs if they can’t make decisions for themselves, and advise them on the most financially efficient ways to accomplish their goals. With nearly 20 years of estate planning experience, I have collected a list of common mistakes or misunderstandings.

#1. DIY Documents.

Estate plans should not be considered a “Do It Yourself” endeavor. With the guidance of an experienced estate planning attorney, you ensure that you’re considering all the issues, your planning goals are met, and your legacy will be easily passed on to others. Wills completed through automated computer programs or purchased at stationary stores may result in negative financial and substantive impacts to your loved ones.

#2. “I Don’t Need an Estate Plan.”

Everyone can benefit from an estate plan. Even if you think you don’t own anything, everyone should have a financial power of attorney and a medical power of attorney. Did you know that if you don’t create your own individualized estate plan, then the state of Oregon has a “One Size Fits All” plan for you? Unfortunately, Oregon’s “One Size Fits All” plan doesn’t meet the customized needs of many people, and it can lead to unintended consequences.

#3. Choosing the Wrong Decision Maker.

Many times, a parent will want their adult children to work together to make financial and medical decisions when the parent can no longer do so. Unfortunately, in my experiences, many times these types of plans don’t work well. Instead, when siblings disagree, an impasse may occur. In the worst-case scenario, litigation may be the only solution to resolve the conflict. Other times, people choose a friend for help, and then for a variety of reasons, the friend is no longer able to help. And on occasion a trusted person turns and becomes a financial abuser. Picking the right decision maker, aka fiduciary, is very important and should be a well-informed and thoughtful process.

#4. Thinking a Will Avoids Probate.

Probate is a court supervised administration of a decedent’s estate. Now don’t get me wrong, I don’t think probate is the 9th level of Dante’s Inferno; and as an attorney, I am very familiar with the rules of court procedure. For certain situations, probate is a beneficial process. But time and time again, clients have the misunderstanding that their wills are not subject to probate. They are shocked when they learn that a will almost always ensures that an estate will be probated. To avoid probate, consider creating a revocable trust.

#5. Letting Your Plan Collect Dust.

Having a plan, but not looking at it again is a mistake. Estate planning is a dynamic process. The plan should not be chiseled in stone and then set on a shelf, never to be thought of again. In general, I recommend that clients review their estate plans every five years. And sooner if there have been significant life changes, such as marriages, divorces, births, substantial changes in assets, medical diagnoses, etc.

#6. “I’m Not Rich, So I Don’t Care About Estate Taxes.”

Thinking you don’t have enough to be concerned about estate taxes (also known as “The Death Tax”) may be a mistake. Even if you own less than $11.58 million which is the 2020 amount when the federal estate tax hits, your estate may still be subject to state estate tax. Both Oregon and Washington have state level estate tax. Without specific tax planning, an Oregonian who dies with a net worth more than $1 million has exposure to Oregon estate tax. The same is true for Washingtonians. However, Washington’s amount is more generous at $2.193 million in 2020.

It is never too late to prepare an estate plan. If you have more questions or want to talk about your estate planning goals and needs, contact one of our estate planning attorneys. Our combined years of estate planning experience is over 130 years.

Be sure to check out SYK’s newest video – featuring Anastasia and focusing on Estate Planning.

Anastasia (Stacie) Yu Meisner is a member of the SYK Estate Planners practice. Her practice focuses on estate planning, mediation, probate, trust and estate administration. In addition, she also works with guardianships and conservatorships, as well as business transactions and formation.

Carrie Fisher: Some Early Thoughts on Her Estate

Carrie Fisher

May the Force be with you Carrie – you were one of the brightest stars.

The entertainment world lost an iconic legend today. Carrie Fisher, best known for her role as Princess Leia Organa in the Star Wars films, passed away this morning after suffering a heart attack on December 23, 2016, while on a flight from London to Los Angeles. In addition to her Star Wars role, Ms. Fisher starred in many other films, and also authored several books, plays, and screen plays. She recently published her autobiography, The Princess Diarist.

From a legal perspective, it is far too early to analyze Ms. Fisher’s estate to any degree. However, one can make a number of observations:

  • Fisher was not married at the time of her death, but was survived by one child, her daughter, actress Billie Lourd, age 24. Ms. Lourd therefore would be Ms. Fisher’s sole natural heir.
  • Fisher was married for a short time to singer, Paul Simon. Ms. Lourd’s father is talent agent Bryan Lourd. However, Ms. Fisher and Mr. Lourd were never legally married. Therefore, neither Paul Simon nor Bryan Lourd would be an heir to Ms. Fisher’s estate, absent an express bequest in her will or trust.
  • Fisher was the child of two entertainers, the late Eddie Fisher and Debbie Reynolds. Eddie Fisher died in 2010, and was survived by four children, including Carrie Fisher. Presumably, Ms. Fisher was a partial heir to Eddie Fisher’s estate, although few details of that estate appear to be public. However, Ms. Reynolds is still living and will likely leave her estate to her surviving son and Ms. Lourd.
  • Fisher was a California resident, so her name and likeness will be protected by the California Celebrity Rights Act for another 70 years. However, her depiction of Princess Leia was apparently transferred by contract to Lucasfilm Ltd. when she starred in the first Star Wars film at the age of 19.
  • Along with her other principal Star Wars actors, Harrison Ford and Mark Hamill, Ms. Fisher agreed to take a percentage of the movie’s profits, plus a take of TV screenings, re-releases and more. Therefore, these residual profit rights will presumably be inherited by Billie Lourd.
  • Carrie Fisher was involved with a number of charitable causes during her lifetime. Her will or trust may therefore include bequests for charitable causes.
  • While Congress and the new administration are considering a repeal of the federal estate tax, any such legislation will likely be effective no earlier than January 1, 2017. Therefore, the portion of Ms. Fisher’s estate that exceeds the 2016 estate tax exemption amount of $5.45 million will be subject to a federal estate tax at the rate of 40%.

Because of their notoriety, the estates of well-known celebrities are often illustrative of many issues that many people face in their estate planning. Only time will tell if important lessons will emerge from the Estate of Carrie Fisher.

The Estate of Prince – Let’s Go Crazy!

Early reports tell us that the late musician Prince died without a will.

Therefore, Minnesota “intestacy” statutes (i.e. statutes govern estates of decedents dying without a will) are going to control the administration of Prince’s estate. In a legal petition filed on April 26, 2016, by Prince’s sister, Tyka Nelson, Ms. Nelson stated that she did not know of the existence of a will signed by Prince. Because of this, no person currently has the legal right to act on behalf of his estate (such as a personal representative, executor, or trustee). In the petition, Prince’s sister asked a Minnesota probate court to appoint Bremer Trust as the “special administrator” of Prince’s estate. Under the applicable statutes in Minnesota, a special administrator has the legal authority to act on behalf of an estate in much the same fashion as a personal representative or executor.

In the coming months, it is likely that more information will emerge about Prince’s estate and the assets compiled by this intriguing artist. The special administrator will likely face of number of challenging questions, including:

  • Who is entitled to inherit Prince’s estate? While Tyka Nelson is Prince’s only full sibling, her petition names five “half siblings” as well. Under Minnesota statutes, half siblings are entitled to the same share of an intestate. If other half siblings are discovered, they will also be considered equal heirs of Prince’s estate.
  • How will Prince’s estate and ongoing business interests be managed? Prince’s estate includes extensive holdings of the rights to the songs he wrote, many of which have never been published or released. As we have seen with celebrity estates of Elvis Presley and Michael Jackson, the artist’s ongoing music sales and other intellectual property continues to have considerable value. Reports indicate that 1 million of Prince’s songs and 231,000 of his albums were sold on the single day in which Prince passed away.
  • How will Prince’s estate be valued for estate tax purposes? While the executors of Michael Jackson’s estate reported an initial value of $7 million for Mr. Jackson’s estate, the Internal Revenue Service has valued Mr. Jackson’s estate and lifetime taxable gifts of approximately $1.178 billion (yes, that is billion with a “b”). The matter is currently in a disputed case before the United States Tax Court. For iconic celebrities such as Prince, the artist’s mere “name and likeness” will likely be a separate and independent asset of the estate having significant value. Like the intangible goodwill of an ongoing business, an artist’s name and likeness has the potential to produce significant income in the future.

“Electric word life. It means forever and that’s a mighty long time. But I’m here to tell you, there’s something else. The after world (and taxes).”

~Prince. Let’s Go Crazy (as respectfully modified by a humble lawyer).

A tale of two families and the wealth they (did not) pass on to their children

We spoke about some well-executed and some not-so-well-executed estate plans at the firm’s recent seminar on famous and infamous estates. Two of the issues we discussed were transfers of business interests and the importance of planning for multiple generations. Here are two examples we did not get a chance to discuss at our seminar, but which are relevant:

First, Bloomberg recently reported that Aerin and Jane Lauder, the granddaughters of the founder of Estee Lauder (the founder was named Estee Lauder, of course), became two of the youngest billionaires in the world this year; due to the appreciation of their Estee Lauder stock. Aerin and Jane are each in their third decade of work at Estee Lauder and each own some stock shares individually while other shares are held in trust for their benefit. Through smart planning, it looks like the family has managed to avoid the “shirtsleeve to shirtsleeve in three generations” story that so many families fall into. The patriarch’s direct descendants appear to have learned enough about the family business (and about the values that it takes to guide the business) to maintain a promising fiscal outlook going into the fourth generation of wealth.

This is a significant achievement. Consider:

Cornelius Vanderbilt borrowed $100 from his mother and turned that $100 into a railroad empire worth over $100 million dollars at the time of his death in 1877. $100 million in 1877 is worth approximately $185 billion in today’s dollars. For a little perspective, Warren Buffet’s net worth is around $64 billion and Sam Walton’s is around $65 billion in todays dollars.

Vanderbilt’s heirs spent the money like Montgomery Brewster. Six years after Cornelius Vanderbilt’s death, his heirs built the first of ten Vanderbilt mansions on Fifth Avenue in New York. Cornelius’ heirs built similarly opulent “cottages” in Newport, RI and one of them, George Washington Vanderbilt II, built the fantastic Biltmore Estate in Asheville, NC – the largest privately owned house in the United States (250 rooms and 178,926 square feet).

Cornelius Vanderbuilt’s heirs were prominent horse breeders, yacht racers, auto racers, and film producers (and alcoholics). Many of the heirs married multiple times. As a result of these career and life choices, by 1920 one of Cornelius’ descendants died penniless, by 1960 the last of the Fifth Avenue mansions was torn down, and by 1977 a survey of family members at a reunion at Vanderbilt University turned up 120 Vanderbilts and not one millionaire.

Planning for the second and third generations is important for any business, no matter how big or small. A proper plan often involves instilling the patriarch’s work ethic in children and grandchildren, communicating with each generation about the direction of the business, properly assessing and preparing for risk, and making informed legal decisions.

Michael Jackson’s tax bill: Off the Wall? Bad? Can they ‘Beat it’?

Michael Jackson spent over forty years singing, dancing and "weird-ing" his way to owning the title "King of Pop". Michael was six years old when he debuted as part of the Jackson 5 in 1964 and was 24 when he dropped the album "Thriller" and the ground-breaking videos for "Beat It", "Billy Jean" and "Thriller". Michael recoded 13 number-one singles and won 13 Grammy Awards during his prolific career and "Thriller" remains the best-selling album of all time. Sadly, Michael died of acute propofol and benzodiazepine intoxication on June 25, 2009. He was 50 years old.

An estate tax return was due for the estate of Michael Jackson on March 29, 2010 (which was probably extended to September 29, 2010). This return listed the assets owned by Mr. Jackson at the time of his death and included valuations on each asset. As you can imagine, Mr. Jackson’s estate probably owned some things that many of us will own when we die: bank accounts, automobiles, real estate, etc. Mr. Jackson also owned some things that were unique to his celebrity status and his profession: recording rights, rights to his likeness and image, his endorsement deals with Pepsi and other corporate sponsors, etc.

The Internal Revenue Service has charged the Jackson estate with undervaluing the assets on the estate tax return, as the estate reported a taxable estate of $7 million. The IRS has sent the estate a tax deficiency notice for $702 million ($505.1 million in taxes and $196.9 million in penalties). The primary arguments surround the estate’s valuation of Mr. Jackson’s likeness and image (valued by the estate at $2,105 and by the IRS at $434 million) and the value of some of Mr. Jackson’s recording contracts owned by "MJ/ATV Publishing Trust Interest in New Horizon Trust II" (valued at $469 million by the IRS and not listed on the estate tax return.)

Most of the audits we come across on estate tax returns feature disagreements over the valuation of assets. When filing these returns, it is often wise to obtain a written appraisal of real property and business interests and then discuss the valuations of these assets (for return purposes) with a tax professional. The IRS has provided a good deal of guidance when it comes to properly valuing assets, following this guidance may save the taxpayer’s family from the headaches (and financial costs) of an IRS audit and appeal.

It is uncommon that the IRS disagrees with tax assessments by over $900 million, as is the case with Mr. Jackson’s estate. It will be interesting to see how the arguments over the value of Mr. Jackson’s assets plays out on TMZ and it will be equally interesting to see the justifications used by the estate and the IRS regarding the valuation of Michael’s likeness.

Two final notes about Michael Jackson: First, today would have been his 55th birthday, so happy birthday Michael. Second, it looks like he has got some new music on the way:

http://www.youtube.com/watch?v=76VC2Dsy1SU

The Administration of the Estate of Darth Vader

A long time ago, in a galaxy far, far away, Darth Vader (“Vader”) died at the end of the movie ‘Return of the Jedi’. Movie-goers around the world flocked to the cinema to see the story of Vader’s redemption and to learn about the twisted Skywalker family tree. I was 9 when ‘Jedi’ was released, and it was awesome.

When I see the Star Wars movies now, I know I am getting old because I start asking questions like, “Did someone have to administer Vader’s estate?”, “How much did Vader get paid”, and “what sort of property would a guy like that have in his estate?” In this blog post, I’ll take a look at what administering Vader’s estate may have looked like. In my next post I will analyze some of the property interests he may have owned at his death and see if there are some lessons to be learned from Vader’s estate. First, a few assumptions:

1. If Vader lived in the United States in 2012, he would probably choose to live in Vader, WA for obvious reasons. Let’s instead assume that Vader was based out of the Empire’s Portland, OR office and maintained a sweet penthouse condo in Portland’s Pearl District as his home.

2. Let’s also assume that Vader died in 2012 and that he had no estate planning documents. If there was important property that was going to pass via Vader’s Last Will or that was stored in a safe deposit box, Vader probably would have mentioned it to Luke as Vader was dying in Episode 6. He did not.

3. Luke’s Aunt Beru and Uncle Owen were killed by stormtroopers on Tatooine during the early part of the first Star Wars movie (Episode 4). For our analysis, let’s assume that Beru and Owen had no living parents, siblings, or children when they died. Let’s also assume that Owen and Beru never legally adopted Luke (in order to stay off of the Empire’s radar).

4. In Episode 1, we learn that Anakin Skywalker (the little kid who would become Darth Vader) had no father. His mother claims that his birth was the result of some sort of immaculate conception. According to Google, Anakin may have been conceived by Darth Sidious’ master using the Dark Side of the Force. We do not have a statute for immaculate conception via Sith Lords in Oregon, so let’s assume that Vader’s father (whomever it is) died before Vader did.

5. We will treat Vader as a member of the armed forces, rather than a high-ranking government employee, independent contractor, or owner of a partnership interest. We will further assume that the families of all of Vader’s victims have no valid claims for the wrongful death, murder, torture, etc of their loved ones.

6. Finally, let’s assume that the commentators on Fox News are correct when they allege that the current federal government is analogous to the Empire in Star Wars. For our example, that means the same tax code, same forms and the same procedures (and the same relaxed gun control policies).

Note: For our not-so-geeky readers, there are 6 Star Wars movies: Episodes 4-6 were released from 1977 – 1985 and Episodes 1-3 were released from 1999 – 2005.

Here is how the estate administration would probably shake out here in Oregon:

At the time of Vader’s death in ‘Return of the Jedi (Episode 6), he had two living children (Princess Leia and Luke Skywalker). Vader’s wife (Padme Admidala) predeceased Vader, as she died at the end of Episode 3 in one of the more foolish deaths in cinematic history when she “lost the will to live”. Vader’s mother died during Episode 2 and we are assuming Vader’s father predeceased him. Vader’s step-brother Owen was killed early in Episode 4. No reference was ever made to Vader having any other siblings. In summary, Vader’s parents, step-brother, and spouse predeceased him, he had no other siblings, he left two surviving children, and he had no grandchildren.

ORS § 112 includes provisions for the distribution of assets of Oregon residents who die intestate (without a will). Vader’s estate would be administered under Oregon’s intestacy statutes in our example. Because Vader did not have a surviving spouse, the administrators of Vader’s estate would look to ORS § 112.045 to determine the distributions passing to people other than a surviving spouse. Under ORS §112.045(1), property would pass, “To the issue of the decedent. If the issue are all of the same degree of kinship to the decedent, they shall take equally, but if of unequal degree, then those of more remote degrees take by representation.”

In our example, since Luke Skywalker and Princess Leia were Vader’s children, they are of the same degree of kinship. Vader had no other children (alive or dead), so Luke and Leia would each inherit 50% of Vader’s assets. Vader did not name a Personal Representative to handle his affiars (since he left no will). The court would appoint a Personal Representative in this case. While most of our clients are not Jedi Masters or Sith Lords, many of them do die without valid Last Wills in place. This is the sort of analysis we have to go through when that happens.

One remaining issue to be discussed in our analysis of Vader’s estate distribution is as follows: Luke was arguably responsible for Vader’s death. If a court found that Vader died as a result of Luke striking Vader during their final lightsaber battle in Episode 6, then Leia would likely inherit 100% of Vader’s estate. ORS 112.465 provides that, “property that would have passed by reason of the death of a decedent to a person who was a slayer or an abuser of the decedent, whether by intestate succession, by will, by transfer on death deed or by trust, passes and vests as if the slayer or abuser had predeceased the decedent.” My collegue Steve Kantor was quick to point out that Luke could likely argue self defense. I countered by arguing that Luke started the fight. Steve countered by calling me a nerd. There is also the possibility that it was an assisted suicide ("Luke, help me take this mask off…"). These (and other) arguments about the slayer statute are beyond the scope of this article.

The distribution of Vader’s assets is fairly straightforward, since he left two surviving children and no one else. The composition of Vader’s assets is more complex and will be the subject of a future post.
 

“Send lawyers, guns and money, they’d get me out of this…”

The first cassette I ever owned was Michael Jackson’s ‘Thriller’, purchased in 1982. Ten years later, my mom bought the soundtrack to the movie “The Body Guard”, which featured Whitney Houston’s rendition of “I will always love you”. ‘Thriller’ has now sold over 65 million copies and ‘The Body Guard’ has sold over 40 million, making these two albums the number one and number four best selling albums of all time, respectively. Between the two of them, Whitney Houston and Michael Jackson sold well over 250 million records during their lifetimes.

Unfortunately, selling millions of albums is not the only thing Whitney and Michael had in common. Both stars died over the last three years, both had well-documented battles with substance abuse (that may have lead to their deaths), and both were deeply in debt when they died. Whitney Houston borrowed tens of millions of dollars against the sales of records she had not yet made and Michael Jackson owed millions to a long line of creditors, including promoters, banks, and the second son of the king of Bahrain, among others.

Substance abuse and personal debt issues come up regularly in the estate planning process. Where appropriate, many parents condition receipt of trust funds on the passing of drug tests or attending counseling. A properly drafted trust may also protect your assets from the creditors of one of your beneficiaries. If you have relatives who struggle with debt or substance abuse issues, you may want to consider a trust as part of your estate plan.

If you have personal loans, documenting them properly may save your family attorney fees. The federal and state estate tax returns include schedules of the assets and liabilities of the decedent. These schedules are essentially a snapshot of everything a person owned (and owed) when he or she died. Tracking the debts of a decedent is often one of the more challenging parts of compiling the estate tax schedules, because many personal debts are informally documented, if they are documented at all. If you have personal loans, you should discuss these loans with your estate planning attorney, as properly drafted loan documents, combined with accurate amortization schedules, can save your attorney time (and therefore save your family money) during the administration of your estate.

One more note – there are provisions of the tax code which penalize parties for loans made at below market interest rates. If you have a substantial loan – whether personal or business – you may want to discuss the loan terms with your attorney.

The estates of Michael Jackson and Whitney Houston have benefited from increased record sales following the stars’ deaths. A large part of the estate income from these sales will be going to the satisfaction of personal debts. Most estates do not have this sort of income to offset debts and the debts are instead paid from the residue of the estate. For this reason, debts (including your home mortgage) should be considered when planning the distribution of your assets under a will or trust.

Most families will (hopefully) never have to deal with the sort of  substance abuse and debt problems that followed Michael Jackson and Whitney Houston through the later years of their lives. When the issues do arise, however, properly drafted documents may be the family’s best protection agaist creditors and predators who are looking to get access to the assets of the estate. The key, as always, is to communicate the specifics of your situation to an attorney who specializes in estate and business planning.  

Samuels Yoelin Kantor Seymour & Spinrad LLP Attorneys in the News


(Click Image To Launch Video)

SYKS&S partners Victoria Blachly and Jeff Cheyne were recently interviewed by reporter Kerry Tomlinson for a KATU-TV (ABC affiliate) news story about “virtual assets” such as internet domain names, online content such as photos and videos, and personal accounts for email, banking, brokerage and social media sites such as Facebook. Increasingly, personal information and content is being stored online — and few people know what happens to these assets when a person becomes incapacitated or dies.

In other words, who can gain access to our “virtual existence” when we’re gone?

As previously discussed in a two-part “Estate Planning and Virtual Assets” blog post by SYKS&S partner Michael Walker, the answer can be quite complex. For more detailed information, read Part I and Part II of Michael’s post. You can also view the KATU-TV story on the station’s website

As part of the KATU-TV news segment, our estate planning team prepared avirtual assets checklist, which is posted on KATU.com
 


 

Also in the news… partner Steve Seymour was quoted in a recent Portland Business Journal article about the Oregon State Bar’s proposed mandatory mentoring program for new attorneys. The state bar’s mentoring committee is drafting a proposal that could be in place as soon as May 2011.

SYKS&S already has an organized mentoring program in place for new attorneys joining the firm.
 

You are not as poor as you think you are.

One of the most surprising revelations that many of my clients experience is the fact that estate/inheritance taxes will be due upon their death, unless they do some planning.  These clients have been convinced that estate/inheritance taxes only affect the rich, and since they do not perceive themselves as rich, they have nothing to worry about.

What these clients don’t realize, until our initial meeting, is what all is included in their taxable estate.  The asset most often left out is proceeds from life insurance.  If you have a million dollar life insurance policy, and you also have other assets, you will pay inheritance tax in Oregon, which has only a $1 million exclusion.

The second asset most often forgotten is retirement plans.  These amounts are not only included in your taxable estate, and therefore subject to the estate tax, but they are also, without proper planning, potentially subject to income taxes.

The third asset that people seem to forget when calculating their taxable estate is equity in their real property.  This one may seem more surprising than the others, but it happens quite frequently.

Fourth, there are assets that client’s have received from their parent’s estate planning, such as family limited partnership interests, that they tend to forget about.

For those who don’t relish the idea of paying more taxes than is required (and I have yet to meet someone who does),  I recommend having a long discussion with your estate planning attorney about what is included, and what the estate tax exemptions are currently (see earlier posts about changes in the federal estate tax exemption).

Redeal of the Repeal?

In the August 7, 2009, BNA Daily Tax Report, it was noted that Rep. Brady has proposed a permanent repeal of the estate tax.  Do you remember that old Saturday morning cartoon, I’m Just a Bill?  Well, this bill is going to continue to sit on Capitol Hill and will never become law.  You heard it here first.

So, what is to become of the repeal of the estate tax?  Most of those in the know seem to say that we are going to stay with the current $3.5 million exemption.  They are probably right.  However, I think it is dangerous to count on that happening.  Let me spell out for you a less probable, but possible scenario.

 Under current law, in 2010, the estate tax essentially goes away.  Then, in 2011, it comes back with a vengeance, at a $1 million exemption (thank you Senator Bird).  When this process was set up eight years ago, it was thought that there was no way a tax increase would be allowed, so the repeal would go on, regardless of the Bird Rule.  However, now we are in an economic crisis, and the government needs money. 

Many believe that the congressional leadership don’t want to see 2010 with the unlimited exemption, so we can expect finality this year.  It is possible, however, that the they will just punt this year.  With health care taking up the entire agenda lately, the congressional leadership could just extend the $3.5 million exemption for one year while they consider the matter.  They would likely get broad suppport for this extension.  Then, next year, they could decide that Bush’s plan was best after all, and just let the Bird Rule apply.  We would be back at a $1 million exemption without a vote for a tax increase.

You may be thinking the congressional leadership wouldn’t risk this because it affects too many of the voters, but keep two things in mind.  First, because of the recession, less people would be affected as less people will have taxable estates.  And second, the government needs money to finance the change America voted for.

Now, I agree this is not the most probable scenario.  But, it is at least possible, and because it is at least possible, we should consider it in our estate tax planning.