Dear Friends and Colleagues,

From time to time I like to bring estate planning or related material to your attention which may be of use to you or someone you know.   Changes in the law, society and economy can have enormous impact on the way that we plan.  While I can't contact each and every client and friend individually regarding the changes that affect their specific plans, I do like to keep you abreast of developments and issues which may be of some assistance to you or people you know. 

Guardianship Planning

Today, I am enclosing an article I have written which was published in the Women's Bar Association of Illinois Spring 2008 newsletter.  The topic, issues to consider when choosing guardians for your minor children, is an important one, and interest in the matter extends not only to friends and family, but also to clients and professional associates as well. Hopefully this article can be of assistance to people working through the difficult process of selecting potential guardians for their children.  Please feel free to distribute it freely to anyone who may find it useful. 

Tax Exemption and Rate Reminder

The federal estate tax rate and exemption are set by Congress, and they are key variables when deciding how to set up and maintain an estate plan.  These figures determine the amount of assets that one can pass without paying federal estate or gift tax, as well as the amount of tax that one will pay on any assets over the exemption.

 The top federal estate tax rate for 2008 is 45%, and will remain so until the scheduled repeal in 2010.  Barring any further action by Congress on this issue, the sunset provision will set the rate at 55% in 2011.  Please keep in mind that the generation-skipping tax is linked to the estate tax rate, and thus the rate changes in conjunction with the estate tax.

The estate tax exemption, technically the applicable exclusion amount, for 2008 remains $2,000,000.  The exemption amount is scheduled to rise to $3,500,000.00 in 2009 before repeal in 2010.  The exemption amount returns to $1,000,000.00 in 2011.

There is also an annual gift tax exclusion amount, which sets the amount that a person is entitled to make in one year without incurring gift tax (or using up some of one's lifetime $1,000,000.00 gift or estate tax exemption).  The annual exclusion amount was $12,000.00 for 2007 and 2008, but is tied to inflation.  Given the current economic climate, the amount looks to remain the same or possibly increase somewhat for 2009. 

Disability Planning

Demographically speaking, there is no area of estate planning calling for more attention than disability planning.  As the baby boom generation ages, issues which are already important will become virtually ubiquitous.  There are several general principles which we should all be aware of when discussing these issues with our family, friends and clients. 

First and foremost, one must consider the impact of one's estate plan and assets on their potential ability to one day explore both public and private sources of disability benefits.  The federal and state systems for providing benefits to disabled persons are complex and often riddled with potential pitfalls which may disqualify an applicant based on their assets.  Fortunately, there are measures which can be taken to insure that one's assets are maintained in such a way as to maximize the amount of assistance which they could receive in the event of disabling illness or injury. 

On the other side of the equation, there are important issues to consider when one is planing to convey assets to a disabled person.  A sudden bequest to a disabled beneficiary could potentially upset the apple cart with respect to that person's disability benefits.  An assortment of trust options is available to help beneficiaries maintain their benefits even in the face of potential inheritance. 

In either case, it is critical that one account for the impact of estate planning on disability benefits.  Failing to do so can result in significant financial penalties and the dreaded scenario in which one's attempts to provide for their loved ones actually ends up placing them in fiscal jeopardy. 

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I hope that you will take these issues into account when thinking about your own plans, as well as when discussing estate planning with friends, family and clients.  As always, I am happy to answer any questions which you may have any of these issues or estate planning in general.  My web site also has several resources which can be of use to those of you looking for more information on these topics.  I hope that all of you have a safe and fun summer season. 

Sincerely,
Robert J. Varak