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Business First of Columbus - March 22, 2010

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Friday, March 19, 2010

Business First of Columbus - by Carol Terracina Hartman For Business First

 When Grandmother “Saroyan” passed away Jan. 2, her surviving grandchildren said many friends remarked how 

lucky they were at the timing.

By losing her in 2010, the survivors avoided paying the so-called “death tax” – or the hefty tax on her estate.

Had she passed in 2009, the family would have faced a 45 percent tax rate with $3.5 million of tax exemption. If 

nothing changes legislatively, the tax will come back in 2011 at 55 percent with a $1 million exemption.

So, friends were quick to point out, it was fortuitous she died when she did.

 What these friends failed to realize is that “luck” might not be on the family’s side.

Some feel an estate can’t be settled because of potential legislation that could make the tax retroactive, said Mark 

Coffey, a certified financial planner with John E. Sestina and Co. in Columbus.

“It’s very troubling to them,” Coffey said. “As opposed to a family who knows the estate tax and steps up and pays it

— they may be assessed or they may not be assessed. I’ve never seen such a terrible situation for a family.”

Several news reports have conveyed stories of people receiving life-prolonging measures in 2009 just to get to 2010

 when the tax would evaporate.

Others may have the proverbial plug pulled in 2010 – all based on estate tax.

Some may attempt legal steps to dictate medical treatment based on the tax, ideally to save their heirs a hefty 

handover to the feds.

 According to reports in the Wall Street Journal, to make it easier on their heirs, some clients are putting provisions

into their health-care proxies allowing whoever makes end-of-life medical decisions to consider changes in

estate-tax law.

 A living will has a standard format, which does not address estate tax.

 When the physician asks the family for the document, if it is anything beyond a standard template, it may have to

pass through the hospital’s legal counsel, Coffey said.

 Waiting game

Even though the estate tax is gone this year, it was replaced with a 15 percent capital gains tax on inherited assets

that are later sold.

The tax issue dates back to the George W. Bush administration – he wanted to phase out the tax, leading to it being

done away with for 2010.

Kristen Sydney, a wealth adviser with Sagemark Consulting in Columbus, said the 94-year-old estate tax brings

in $25 billion a year, “revenue that’s badly needed.”

In practice for 33 years, Sydney says she has seen many tax law changes and repeals, but this seems one of the most

difficult.

Besides the potential perverse impacts of estate tax, survivors face paperwork puzzles. Within nine months,

survivors must file the estate tax form 706 with IRS.

No such form for exists for 2010, said Philip Lilly, founding partner with law firm Becker Lilly LLC in Columbus.

“Do you use the 2009 form and jerry-rig it best you can and attach a note ‘as of time of death …?’ ” Lilly said. “The

 beneficiaries are sitting around saying, ‘When are we going to get the distribution?’ – when the executor is going to

have to hold back the distribution.”

Lilly said clients need to update their estate plans, whether that needs a health care proxy for end-of-life measures

e law changes impacted medical choices - Business First of Columbus: http://columbus.bizjournals.com/columbus/stories/2010/03/22/tidb

3/29/2010

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or not.

 And they may need to review, renew and recycle in 2011.

“What we’re telling clients this year is ‘Let’s wait until the second half of the year and have some sense of what Congress is going to do,’

 whether they will act for 2011 or act retroactively to Jan. 1,” Lilly said.

Sydney agrees.

“People need to get to their planners, their CPAs, their attorneys,” Sydney said. “This is not the time to relax.”

Carol Terracina Hartman is a freelance writer.

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e law changes impacted medical choices - Business First of Columbus: http://columbus.bizjournals.com/columbus/stories/2010/03/22/tidb

3/29/2010