For at least the last two decades, estate tax laws have been constantly changing and subject to “temporary” tax provisions. Even though estate planning is forward-looking, there has been no way to accurately predict what the tax law would be next year, let alone when the maker of the will actually passed away!
For many people of comfortable means, this has meant an annual (and often expensive) trip to their lawyer’s office to prepare unintelligibly complicated estate documents to try to reduce the potential tax bite.
This law has finally brought some certainty to the estate tax laws: In short, for taxpayers worth less than $5 million (and married couples worth under $10 million), the estate tax is a thing of the past. Gone, too, are most of the complicated gyrations married couples had to go through to take advantage of both spouses’ exemptions. Good riddance.
Even better news. Many states with inheritance taxes are phasing them out or have eliminated them completely. Taxpayers in Indiana no longer have to worry and Tennesseans are about to join them! In Illinois, beginning this year, only estates over $4 million are subject to state death taxes.
The results of these federal and state tax simplifications and phaseouts should be incredibly positive. Estate planning should be a lot simpler for most people. The all-too-frequent, tax-driven professional reviews of these plans will come to an end. Without having to consider estate or inheritance tax, probate proceedings should also be simpler and cheaper.
But does this mean you should treat estate planning as a do-it-yourself project?
You are free to write your own will, and many have done so successfully.
Many lawyers do not make money writing wills. In fact many “lose money” and don’t cover their overhead for the time spent. Often, they provide simple estate planning as a service to their clients.
Before you decide to buy will software and go it alone, there are several things you should consider:
Effective estate planning also includes providing for your minor children. Who should rear them if both parents die? Should their guardian have access to the purse strings? If you become disabled and your spouse can’t act, who should make decisions about your welfare? What if there’s a dispute among the family?
What if your spouse remarries? Do your children get “cut out” in favor of the new person’s kids?
How about your IRA and life insurance? Are the beneficiaries up to date? Should you roll over the IRA now to a Roth IRA and avoid a nasty tax problem? Either way, did you choose a beneficiary that would minimize the income tax consequences? (And you thought the tax problems were gone.)
Many do-it-yourself wills (and trusts) have survived the probate process, but have been delayed or subjected to additional legal procedures because their makers didn’t follow certain formalities or weren’t aware of the consequences of those “helpful” terms and phrases they thought “would be a good idea” to include. Remember, you won’t be around to explain what you meant to say.
Any amount these do-it-yourselfers saved by not consulting an attorney was more than consumed by additional probate costs. The law reporters are full of examples of probate cases that “saved” a few hundred dollars and wasted thousands of dollars. (And those are just the cases that went up to the appellate courts!)
An estate can easily be whittled away to nothing if it comes in dispute.
Estate planning remains important. While the estate tax may be gone, the probate process isn’t. The same important considerations apply. You’ve worked a lifetime to accumulate your possessions and you should invest a few dollars in making sure your legacy isn’t wasted.
