"A lot of people who were involved in estate planning design used to do it in a vacuum, more or less," he says. "More often than not, when getting involved with clients, we are certainly thinking about doing estate planning in a much more flexible manner than we might have four or five years ago."
Some clients, for example, are reluctant to lock up money in a trust that may turn out to be unnecessary. One answer, he says, could be a second-to-die contract that a spouse could put into a credit shelter trust. "If nothing happens, you still might be able to use it as a tax-deferred cash vehicle," Anderson says.
One strategy Hodges uses to steer clear of the estate tax uncertainty
is gifting. For larger estates, he uses 'zeroed out" grantor retained
annuity trusts (GRATs), which allow grantors to transfer property in
exchange for a fixed annuity, which can be for a set term or for life.
The benefit of this vehicle, Hodges says, is that any assets remaining
in the trust after the annuity expires pass tax-free to the
beneficiaries. "All that value would go onto the next generation
without any gift tax liability," he says.
The one drawback to this planning vehicle is that if the grantor dies
before the annuity expires, the value of the trust goes into the
estate-a problem that can be addressed in some cases by setting a
lifetime limit on the annuity.
Hodges says another issue his firm has been involved in the past few
years is the reviewing and updating of wills.
A typical will, he says, may split an estate into marital and family
trusts, with the stipulation that assets not subject to the estate tax
be put into the family trust. That, he says, can lead to unintended
consequences if the estate tax is repealed, resulting in nothing going
into the marital trust. "What it's doing is making people really think
about their wills and how their wills work," he says.
One thing that estate planners don't seem to be worried about is a
dropoff in business if the repeal does happen. Many say they feel the
opposite is true, as reduced taxes will result in clients having to
transfer more assets to their beneficiaries.
"I think clients want to take action because they want to take care of
their family and make sure there are sufficient assets to do so," says
Lori Sidrony, practice management manager at 1st Global Inc., a
Dallas-based broker-dealer that specializes in working with accountants
and attorneys.
Ness agrees, saying that tax savings are usually not the driving
motivation when clients sit down to draw up an estate plan.
"The world isn't really tax driven when it comes to their selection of
a trustee or in a lot of respects in their estate planning," Ness says.
"They have a family member they care about, a situation they want to
protect against and, 'Oh, by the way, we want to do it in the most tax
efficient way possible.'"
Cole notes that during the family retreats organized by her firms, tax
savings strategies are never a topic of discussion. "With most of the
larger estates, it's all about giving back and teaching those same
values to the children," she says.