By Stephen J. Dunn
Forbes reports that estate planning attorneys have seen their work dry up in the wake of the December, 2010 estate tax relief legislation. That legislation raised the value of property which an individual can leave free of estate tax (“unified credit”) to $5,000,000, allows a decedent’s estate to use the remaining unused unified credit of his or her last predeceasing spouse; and lowered the highest Federal estate tax rate to 35%. The vast majority of people no longer need sophisticated estate planning to avoid estate tax. As a result, estate planning attorneys are seeing their work dry up and they are reinventing themselves in other practice areas, such as helping physicians comply with laws affecting them.
In the 1990’s, people with modest estates readily paid $2,000-$3,500 for an estate plan. Larger, more complex estate plans cost much more.
Then there were the gimmicks. Devices such as grantor retained annuity trusts (“GRATs”) and family limited partnerships (“FLPs”) generated large fees for estate planners, and often fail their objective of passing property to the next generation free of estate tax.
There was a seeming endless proliferation of “charitable” giving devices, such as charitable remainder trusts and private foundations. These cost a small fortune to create, are a veritable annuity to attorneys and accountants in administration fees, and tend to keep the bequeathed funds from the charitable beneficiaries.
High-end estate planning reminds me of my favorite nursery tale, Hans Christian Andersen’s The Emperor’s New Clothes: what matters is not whether the client is getting value, but whether he thinks he is getting value.
Demand for estate planning has actually been declining for years. People are reluctant to pay fees for work that does not currently benefit them. They don’t see estate planning as a productive use of their funds.
Thankfully, estate planning is not a large part of my practice. I do estate planning for my business clients, and for others who request it. I guide my clients away from gimmicks. I encourage my clients to make cash gifts to charities, and I perform due diligence on their identified charitable beneficiaries.
People still need to plan their estate, to make sure their property goes to the persons they want it to go to, and to avoid probate on succession to their property. But I would say that planning to qualify clients for Medicaid coverage of nursing home care has surpassed estate tax avoidance as an objective of estate planning.
And people need the assistance of an estate planning attorney in planning their estate. Poorly-drawn, ambiguous documents can spark litigation, and fail the testator’s purpose. But the days of carte blanche fees paid to estate planning attorneys are passing away.