May 2012, Volume 1, Issue 3

Two questions I have recently heard from clients are:

  1. Why should I set up an estate plan now if the exemption laws are likely to change after the 2012 election?
  2. Why should I set up an advanced estate plan if my assets are worth less than the $5.12 million exemption?

There are many qualitative, non-tax related reasons for setting up advanced planning tools such as trusts, regardless of the size of your estate. Click here for a more detailed overview of these issues. 

From a taxation perspective, the analysis shown below illustrates the benefits of advanced planning for an estate currently valued at $4 million.  As you may recall from last month's newsletter, your estate could be worth more than you think.  Additionally, the illustration holds for estates across a wide range of values. (Feel free to contact me for an analysis of your estate.)


The key to the analysis is that, no matter what public policy changes may (or may not) occur in the future, there is a significant benefit to your heirs to be found in advanced estate planning. Tools such as trusts and family partnerships transfer funds out of the taxable estate and increase the financial benefit to your beneficiaries. The amount of this benefit varies, of course, depending on the annual growth rate and the estate tax exemption.


So, for a relatively small investment now, hundreds of thousands, or even millions, of dollars in wealth can be preserved for your heirs. 


A note about our assumptions: the illustration assumes a 5% annual growth and uses the current estate tax rate of 35%. If the tax rate were to increase, the value of the savings with advanced estate planning would as well. The current estate tax rate is set to expire at the end of this year.  Any future legislative decisions could include an estate tax rate significantly higher than this historically low rate. 


Every family's circumstances and goals are unique. Please contact me to discuss your estate planning needs.  
Next month: The benefits of holding your real estate in a trust.
Write Your Own Will?

At P&S, part of our mission is to educate clients and other members of our community about the best ways to plan your legacies and care for your families in the event of unforeseen tragedy. The decisions you need to make may be very complicated, and the language of the law is notoriously complex.   
To that end, we have been concerned by the proliferation of "do-it-yourself" will-writing software programs.  As this review in Consumer Reports  shows, these programs can easily lead to errors and inconsistencies in estate plans.  Unless your estate plan is exceedingly simple, CR reports that of all the programs it reviewed, "none of them is likely to meet your needs." 
We would like to help you make sure the will you created with a DIY software program says what you want it to say so your intentions are clear.  If you have a will you created yourself, contact us for an appointment and bring it in for a free evaluation. 


About Pierson & Strachan

Pierson & Strachan P.C. is a law firm serving clients throughout Lake and Cook Counties specializing in estate planning and probate, real estate and land use, business law, and other contract matters. From issues that affect your family to those that impact your business, our attorneys combine cutting-edge technology with personal service to vigorously represent your interests and get you the results you need. Read more>>


Pierson & Strachan, P.C.
Craig Pierson
Attorney at Law


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This information may address some questions, but is not intended to be a comprehensive analysis of the topic or legal advice.  Independent tax and legal advice is recommended.