Estate laws are in flux

by Stephaine casteel

September 13, 2007

You are a busy woman. Multitask is your middle name. You know you really ought to get that estate plan in place, but death isn’t as imminent as Friday’s deadline or the haircut before the black-tie event on Saturday. Maybe next week you’ll get around to it.

Besides, didn’t you hear that the estate tax laws are currently in a state of fl ux? In 2007 and 2008, you may pass up to $2 million of assets at death without paying an estate tax. In 2009, you may pass up to $3.5 million of assets at death without estate tax, and in 2010, the estate tax will be repealed. So why not wait until after 2010, when the exemption drops to only $1 million? Not only will the exemption be certain, but since it’s lower, you may actually need some planning.

Even though the estate tax law is uncertain, the need for estate planning is certain. And it shouldn’t wait. Forget estate taxes – even more important is whether your property will pass as you desire, whether you or the court will select the guardian of your minor children, and whether your domestic partner will be allowed to visit you in the hospital against the wishes of your family. You must make these decisions or a court will make them for you after unnecessary time, administration and expense. You have worked hard all of these years to care for your family and to enjoy the property and wealth you have accumulated. Don’t you want to ensure that at your death what you have worked for is protected?

You need a will.

If you die without a will in Georgia, your children and spouse will generally share equally in your estate. Your children will receive their shares when they reach age 18, regardless of their levels of maturity. Your domestic partner will be entitled to nothing. The court will decide who will have custody of and raise your minor children, if another legal parent does not survive. The court will name the person who will administer your estate and collect and distribute your assets. The court will require annual reports and possibly the posting of a bond from your estate’s administrator.

If you die with a will, you may name your domestic partner as the recipient of your property. You may keep your property intact for your spouse’s support if he needs it. If you are worried that a new spouse or lover may divert your assets away from your children, you may leave your property in trust so that you know your property ultimately will pass to your children. If you die with children, you may stipulate that they do not receive your property until they reach certain ages
or benchmarks in their lives. You may plan for the support of your aging parents. You may waive all court filings and the posting of bond. You may name the guardian of your minor children and the person to administer your estate. You may make charitable provisions.

You also need to coordinate your will with assets that pass pursuant to a beneficiary designation, such as life insurance, retirement assets, and joint and survivorship accounts. These assets are not controlled by your will. But don’t just name your estate as the beneficiary. If your estate is named as the beneficiary of a retirement account, accelerated income taxes may result. If your estate is named as the beneficiary of your life insurance, the proceeds may be available to creditors. Do you even know who is named as the beneficiaries of these assets? Are you sure that after you divorced your spouse or separated from your domestic partner, you removed that person as your named beneficiary?

Get disability planning documents.

Importantly, a well-thought-out estate plan also includes a financial power of attorney and a health care directive (the latter now available under Georgia law since July 1). You are more likely to become disabled than to die. If you become incompetent without a financial power of attorney, you would have no one to take care of you or your financial responsibilities unless someone initiates a court proceeding for the appointment of a legal guardian. A financial power of attorney allows you to name the person authorized to make your financial decisions if you cannot make them yourself.

If you do not have a health care directive, doctors and hospital staff will determine your treatment and whether to take extraordinary life-sustaining measures. Also, because a domestic partner is not considered family, your family members could keep her out of your hospital room. A health care directive allows you to name the person authorized to make health care decisions for you if you cannot make them yourself. This person also may be given the right to ride in the ambulance and to have visitation rights, regardless of whether she is a family member or has family member consent. A health care directive also sets forth your wishes regarding extraordinary measures, if you have a terminal condition or become in a state of permanent unconsciousness. Don’t you want to be the one to decide whether you are kept alive by life support or other artificial means? Don’t you want your partner to be able to see you in the hospital?

One goal of proper estate planning is to minimize estate taxes that may be due at your death. But the primary goal of estate planning is to give you and your family peace of mind during difficult times. On your never-ending “to-do” list, add meeting with a qualified attorney who specializes in estate planning. Do not leave this task to your real estate lawyer who also drafts wills or to your company’s business lawyer. Estate planning is a specialized area, and it is important to meet with a specialist who can prepare a proper estate plan.

Stephanie “Stevie” Casteel practices law in the Atlanta office of King & Spalding LLP, and is a member of the firm’s tax practice group. Casteel leads the firm’s charitable planning and tax-exempt entity practice, and she also focuses on wealth transfer, business succession planning and estate administration.

Quick and Simple:
what you need to know

• Your estate plan should include a will, a financial power of
attorney, and a health care directive.
• A living trust is not necessary in Georgia because probate is
simple and inexpensive.
• An estate plan is state-specific. If you move, be sure to consult
with an estate planning professional in your new resident state.
• Your estate will be subject to estate tax at your death if the
value of your estate (including your home, insurance owned by you,
retirement accounts, and financial assets) is greater than $2 million.
• Even if your estate is not taxable, a will is necessary to pass your
estate to the persons you desire, to use trusts for the protection of
your children, to delay distribution of assets to your children, to name
the persons to administer your estate, and to eliminate court filings
and decrease the cost of probate.
• Your will does not control assets passing pursuant to a
beneficiary designation, such as a joint and survivorship account,
IRA, or life insurance, so these designations must be coordinated
with your will.
• You may pass up to $1 million of assets during your lifetime,
which count against the $2 million estate tax exemption, without
paying gift tax.
• Annual gifts of up to $12,000 per person, and the payment of
medical or tuition expenses directly to the medical or educational
provider, do not count against the $2 million estate tax exemption.
• Gifts to charity, regardless of the amount, are not subject to
estate or gift tax.