According to a 2010 industry trends survey of estate planners, nearly 70% of the respondents indicated that Americans fail to plan because they lack awareness as to why they should. Bernstein is passionate about building awareness of the importance of thoughtful planning and is committed to educating the public about the negative consequences of what can happen to one’s loved ones when the proper documents are not in place.

Bernstein noted that estate planning is one of the most overlooked areas of personal financial management. More than 120 million Americans do not have proper estate plans to protect themselves or their families in the event of sickness, accidents, or untimely death. This costs many families wasted dollars and unnecessary hardship that can be minimized with proper planning.

In 2008, the National Association of Estate Planners and Councils (NAEPC) worked with Congress to pass a resolution proclaiming the third week in October as National Estate Planning Awareness Week. The resolution noted that “Many Americans are unaware that lack of estate planning and financial illiteracy may cause their assets to be disposed of to unintended parties by default through the complex process of probate.”

“Estate planning is a thoughtful process and not merely a single legal transaction,” said Bernstein. “It is part of the mission of the Bernstein Law Group to assist members of our community in planning for and protecting that which is most important to them,” Bernstein stated. “National Estate Planning Awareness Week is one more way to get the message out about just how important it is for every adult American to have a comprehensive, up-to-date estate plan.”

The Massachusetts Department of Revenue has issued a working draft directive on the issue of deaths occurring in 2010. This directive, if it becomes the rule, may cause a double tax on many 2010 estates.

BRIEF BACKGROUND As many of us know, the federal Tax Act of 2010 became law at the very end of last year. Prior to the passage of the Act, there was no federal estate tax for individuals who died in 2010, but there was carry-over basis. As most people’s estates are well under $1 million, the possible loss of the step-up in basis was a significant issue (especially if they had transferred property to others or put in trusts, but retained enough “tax strings” to have the property included in their estates in any other year). The Act was a wonderful solution for most estates of someone who died in 2010. Under the Act, an estate of someone dying in 2010 is, by default, under the federal “estate tax regime”, thereby avoiding federal estate taxes if the estate is $5 million or less and also avoiding federal capital gains taxes, because of the step-up in basis of all assets.

But larger estates may opt out of the “estate tax regime” with an election and, therefore, be under the carry-over basis rules and have no federal estate taxes. An obvious example of an estate that would most likely benefit from “opting out” of the “estate tax regime” would be the George Steinbrenner estate, who was reported to be a billionaire when he died in 2010. By dying in 2010, his family was afforded the opportunity to save hundreds of millions of dollars in estate taxes.

THE MASSACHUSETTS DOUBLE TAX TWIST?
Many of us that practice in the estate planning area assumed that the Massachusetts Department of Revenue would follow the stepped-up basis rule, because Massachusetts still had an estate tax if an estate exceeded $1 million. Then the DOR published a surprising working draft directive. If this directive becomes the rule, some estates will pay both Massachusetts estate taxes and Massachusetts capital gains taxes. Additionally, some smaller estates will pay Massachusetts capital gains taxes simply because the individual died in 2010.

The DOR, in its working draft directive, states that anyone dying in year 2010 who is a Massachusetts resident or has property owned in Massachusetts will be treated under the EGTRAA rules and under code section 1022. Result, no step-up in basis, but with the ability to allocate up to $1.3m of basis ($3m to a spouse). This is a big deal! Especially in light of the issues of what items we may not be able to allocated basis to (i.e., life estates or irrevocable, income only trusts – most frequently used in the Medicaid planning context).

I encourage everyone to respond to the Massachusetts Department of Revenue and to our state representatives and senators that the working draft directive be revised or that a law be passed to fix this serious issue.

The Bernstein Law Group has developed Continuing Education programs designed to increase financial advisors’ knowledge of basic estate planning concepts and advanced planning strategies. The workshops aim to teach Massachusetts accountants, financial advisors and life insurance professionals how to use existing estate planning services more effectively.  Often, Continuing Education credits are offered for those who need to keep their licenses current. 

Our law office is committed to offering quality educational programs that will not only empower the financial advisor in the advanced strategies of estate planning, but also increase the advisor’s edge in the increasingly competitive financial services arena.

· Current Demographics: How to determine who needs Medicaid Planning

· Overview of Rules and Exceptions: Interrelationship of trust law, tax law and insurance products

· Planning Solutions: Legal, tax and non-legal (product) strategies to accomplish clients’ goals

· How to use this knowledge to benefit clients and increase income

Strategies to protect assets for both single persons and married couples using trusts, annuities, long-term care insurance and life insurance, all while minimizing gift and income tax consequences were discussed.