Brown & Associates - Attorneys & Counselors at Law, P.L.L.C.

SEMINAR ON ESTATE PLANNING AND AVOIDANCE OF TAXES
(10/20/01)

Estate planning isn't a mystical science that only a few can learn. Everything estate planning attorneys do is dictated by the wishes of their clients and by state and federal laws.

Upcoming Autry Tech Seminar, including Elder Care Issues

If you would like to learn more about estate planning, Gary Brown and I will be teaching a two-day seminar at Autry Tech this coming Tuesday and Thursday, October 22 and 24. The cost charged by Autry Tech is minimal and it's an opportunity to learn about estate planning in a relaxed classroom atmosphere without any sales pitches. As an added bonus, the first night we'll discuss some of the more important elder law and long-term care issues and advise you of possible solutions. Hope to see you there.

Tax Planning

I'm always surprised when I read that someone with a substantial estate has died and didn't do anything to try to avoid or at least to reduce the estate taxes to be paid.

Most everyone I know does everything possible to reduce their income tax each year. They buy a home, make large charitable contributions, plan their medical expenses so they can lump most of them in one taxable year, claim every available deduction, take advantage of every dependency exemption, and even take out home improvement loans and second mortgages so they can pay down their non-deductible credit card debt and convert it to deductible mortgage debt.

These same people never think about trying to reduce the estate taxes that will become due when they die. At least with income tax, every year you have a chance to come up with new ways to minimize your taxes. With the estate tax, you have one chance. Whatever actions you take prior to your death will determine whether your estate owes taxes or not.

Even if you don't have a taxable estate, you still may need an estate plan tailored to your individual situation. It should preserve as much of your estate as possible, make sure your assets are distributed to the right people, and if you're married, provide an appropriate income for your surviving spouse. You'll also want to make it as easy as possible on your personal representative or trustee and to keep administrative expenses to a minimum. Finally, if you have a taxable estate, you won't want to pay any unnecessary estate taxes to Oklahoma or the Federal Government.

Judge Learned Hand put it best when he ruled that "nobody owes any duty to pay more tax than the law demands." those words are as true today as they were when they were written in 1934. Your estate plan can and should accomplish every one of the goals I mentioned above. Unfortunately, many fail to achieve these results.

I'm Too Poor to Need an Estate Plan

Many of you think that if you don't have a million dollars you don't need an estate plan. Nothing could be further from the truth. Often those with relatively modest estates require more planning than those with larger ones. If you are in a second marriage, own a farm or small business, or have a child with special needs, your estate plan must deal with some very compex issues.

It's not unusual to find a farmer or rancher whose income is minimal because he always prepays for his supplies and equipment, trades up for new equipment, keeps acquiring more land, and only takes out only as much income as needed to support his family. He drives a 10-year old pick-up and lives in a 50-year old farm house, but his property makes him a rich man for estate tax purposes. Unless he does something to minimize the taxes due at his death, his family will find itself in a tough situation when he dies. Since his only assets are farms and farming equipment, if estate taxes must be paid, something has to go. It probably will be the farm.

Poor Advice Leads to Poor Planning

Even if you realize you have a problem and seek assistance, you may not be out of the woods. Not all advisors and attorneys are equal. Just as in medicine, some attorneys are specialists and others are general practitioners. Over the years, I've handled estates in which taxes could have been eliminated or reduced significantly with just a little tweaking here or there. Unfortunately, by the time I saw them, it was too late.

Sometimes it's the advisor's fault because he fails to advise the clients of the options available or gives the client what is asked for, not what's needed. Other times, it's the client's fault because the client is told what needs to be done, but can't, won't or just doesn't do it.

Doing it on the Cheap

Some clients know what they need, but think they can strap something together to get the job done without professional assistance. I remember a case in Colorado almost twenty years ago. A very wealthy executive didn't want to pay for an estate plan. Instead, he called in a college classmate who worked for him. The classmate had graduated from law school some 30 years before, but had never been admitted to the bar or practiced law.

Wanting to please his boss and good friend, the classmate said " Sure, I can prepare a Will for you." And he did. He went to books he hadn't looked at in decades, sat down at his typewriter, and typed a Will straight from the formbook only adding the executive's personal information. The executive read it, patted himself on the back for saving a hundred dollars or so, and signed it.

No one knew about the Will until some five years later when, after the executive died, it was found among his personal effects. Even if everything had been done properly, the Will was a loser because it didn't incorporate any tax planning. As it was, it proved to be invalid due to faulty execution, the executive's estate was probated under the Colorado rules of intestacy, and his family wound up paying several hundred thousand, if not millions, of dollars in unnecessary estate taxes because he wanted to save a hundred dollars or so in attorney's fees.

Admittedly, this is an extreme example. It sticks in my mind because I knew the family well and saw the unnecessary stress and expense to which the wife and children were subjected.

Not everyone needs a complex estate plan. Nor does everyone even need a Will. Those of you who do, however, are well advised to sit down and review your situations with an estate planner who can tell you what you need and how to get it.

Gary and I hope to see you at the Autry Tech estate planning seminar next week. Just think: 2 Attorneys, 6 hours, $25!

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