today may protect those assets from a future marriage ending in divorce. But what if you are already married and, as is so often the case, failed to heed the advice of obtaining a prenuptial agreement? Well, perhaps your parent, or some other benefactor, can create a beneficiary defective irrevocable trust (BDIT) for you. You can then sell assets to the BDIT, without improperly dissipating marital assets, so long as a note is received in exchange that is equal to the fair value of the assets being sold to the BDIT. The sale can then permit a family business or other asset to grow outside your taxable estate and safeguard that asset from the potential ravages of a future divorce.
BDITs are discussed and explained in greater detail in Chapter 5. Some unique 2012 applications of this planning technique are also discussed.
CAUTIONS AND CAVEATS
While repeating the obvious, at the time of this writing no one can predict what the future of the tax laws will be. State laws (tax and otherwise) differ rather significantly. Everyone’s family and financial circumstances are unique—everyone’s perspectives and attitude on estate planning are different. Some people are almost phobic and as a result paralyzed by any planning strategy that is complex. Others are razor focused on saving taxes regardless of the complexity involved. Perhaps, more than ever before, you need to clearly identify and explain to your professional advisers your particular circumstances and feelings about planning.
Cautions for Professional Advisers
Many of the ideas, sample clauses, and other material included in this book may not be appropriate for all clients. Each idea or suggestion must be tailored to fit the specific client needs, circumstances, and temperament. Generically applying the “standard” advice at the significant levels that many 2012 wealth transfers will take could prove disastrous.
Do all practitioners have an obligation to inform all clients of the 2012 planning opportunities? If a practitioner fails to notify clients of these planning opportunities and the client misses the window of opportunity, has the practitioner violated the standards of practice? Will the client’s heirs be able to sue the practitioner for failing to communicate what might be the limited time period for which current planning opportunities remain? We believe that no practitioner should have any liability for not informing clients of the 2012 planning opportunities unless he or she has promised a client to do so. Media attention given to the potential for adverse tax law change has been so prevalent that no one should realistically be able to claim that he or she was unaware of the situation.
However, not communicating with clients is clearly not good business planning for the professional. Practitioners should endeavor to inform every client (whether active or inactive) to evaluate 2012 planning opportunities while it is still feasible to do so. There is still ample time to notify clients via a mailing, newsletter, phone calls, or through other appropriate communications. Ideally, the communication should be in written form so that the practitioner will have a record of what was done. From a marketing standpoint, a written communication is more likely to receive attention from elderly clients who may not be e-mail savvy. Moreover, a written communication is more likely to be shared by a parent or other potential benefactor with heirs who might benefit from the planning.
For many professional firms, an online blog or newsletter will likely have already been used to disseminate the 2012 planning message. But if the newsletter is only sent via e-mail, a very substantial portion of the firm’s client base may be missed. Many firms favored using e-mail addresses in their databases when they began their electronic communications. However, for many elderly clients and for clients that have been inactive for 5, 10, or more years, no current e-mail address may be available. So relying solely on an e-mail communication will likely miss a significant portion of the clients who might benefit most from 2012 planning. A simple and cost-effective method to get clients’ attention and visibility for the firm is a postcard mailing to all clients.
PLANNING NOTE: Sample letters and a postcard are reproduced in Appendix B and are also posted on www.laweasy.com to provide you easy access to these items.
Cautions for Consumers
For those of you seeking guidance on how the 2012 planning opportunities and the myriad of possibilities for the future of the tax laws that may impact your personal situation, this book will provide a better understanding of the subject matter and en-able you to have a more productive meeting with your estate planning team (attorney, CPA, financial adviser, insurance consultant, etc.). Attempting to plan on your own, or using an “inexpensive” document production or planning website, was never a sensible idea, and it certainly isn’t now. You can never substitute a boilerplate legal form for the decades or more of experience of a professional estate planner, especially in the unique situation you are facing today. Estate planning is about planning for you and your family, focusing on your individual needs, your unique objectives, and as such it must be tailored to your particular situation (which is dynamic and ever changing).
SUMMARY
Never before in the history of the transfer tax system has there been such a potentially valuable and narrow window of opportunity as presented by the remainder of 2012. While uncertainty abounds, succumbing to that uncertainty, instead of proactively planning, could result in losing out on tremendous tax, asset protection, divorce, and other planning benefits. Depending on future developments, assumptions made today may prove incorrect and, as a result, the fruits of planning may be less than optimal. But even with that risk, engaging in proper planning today will likely prove dramatically better than doing nothing. Many unique planning opportunities and technical nuances of 2012 planning are reviewed in the following chapters.
