Happy New Year!

As we ring in the new year this evening, many Americans will make their new year’s resolution to make a positive change for 2009. When we wake up in the morning, there will be at least a few significant changes to the federal estate and gift tax exclusion amounts. The estate tax exclusion amount will rise from $2,000,000 to $3,500,000. That means estates under $3,500,000 will not have to file a federal estate tax return. If your resolution is to not pass away in 2009, then you will have to wait and see what Congress does legislatively with the estate tax exclusion amount this year.

Additionally, the annual gift tax exclusion amount will rise from $12,000 to $13,000 per donee. That means that you can gift up to $13,000 ($26,000 if your married) to as many people as you want without having to report it on a gift tax return and without using any of your $1,000,000 lifetime exemption.

Happy New Year from Wrightsel & Wrightsel

It Beats Golf!

I am out of the office today, attending the second day of the Ohio State Bar Association’s Technology Conference. The Conference covers technology issues for the legal practitioner. Although the cost of the Conference rivals a couple days of golf, the return on investment is higher. Many of the topics are focused on helping the practitioner become more efficient. Yesterday’s session on controlling and organizing emails was worth the price of admission.

in⋅no⋅va⋅tion

One optimistic view of the effect of the financial crisis and our poor economy is that it will drive innovation. In a Wall Street Journal interview of Harvard Business School Professor Clayton M. Christensen, he states that “[t]he breakthrough innovations come when the tension is greatest and the resources are most limited. That’s when people are actually a lot more open to re-thinking the fundamental way they do business.”

Another Planning Tool Available in Ohio

Most people are aware that they can nominate a guardian for their minor children in the event that they are no longer available. This is typically done in a person’s will and may also appear in a separate document such as a power of attorney. Ohio law now provides that parents can also nominate a guardian for an adult incompetent child. Any parent who acts as a caregiver or otherwise assists an adult incompetent child may very well want to select a person or persons to continue in that role should that parent become unavailable.

Quote of the Day

“Our complaint alleges a stunning fraud that appears to be of epic proportions”

- Andrew M. Calamari, SEC associate director of enforcement, referring to a “Giant Ponzi Scheme” purportedly run by Bernard L. Madoff, a former chairman of the Nasdaq Stock Market. Mr. Madoff was arrested by federal agents yesterday for his alleged role in a $50 Billion Fraud (that's billion with a "B") as reported by The Wall Street Journal. The article notes that if the assertions are true, it would be five times larger than the WorldCom accounting scheme.

Timing is Everything

When markets are down, opportunities abound. People interested in reducing the size of their estates can often maximize their gifting during downturns in the market, both real estate and stock. With respect to real estate, one can gift their residence to their children, retaining the right to live in it, by use of a qualified personal residence trust (QPRT). An article by Mike Spector in The Wall Street Journal indicates that, due to the falling value of many homes, this is the ideal time to make such a gift. Another gifting strategy is available for people who have charitable inclinations. A Charitable Lead Trust (CLT) provides that a charity gets the income from the trust for a set term and then the grantor's heirs receive the remainder. A CLT funded with stock that is likely to rebound and appreciate over the long haul is ideal. If you want to skip giving anything to charity, outright gifts of such stock up to the annual exclusion amount of $12,000 is another possibility. You say you don’t like to gift? Consider selling depreciated stock at a loss to offset any capital gains or to a lesser extent ordinary income. If you fail to see the silver lining in these various strategies, you can do what many people are currently doing…wait for the market to rebound.

Social Networking: The ABA Joins the Act

Many people, attorneys and non-attorneys alike, are experimenting with social networks. Social networks are internet communities where people maintain profiles and can interact with others. I would categorize the main social networks as follows:

MySpace = strictly social,
Facebook = largely social with some potential for professional contacts,
LinkedIn = largely professional.

For most of us, the jury is still out on the value of social networks. The American Bar Association (ABA) Journal covered this topic in its recent article Social Promotion. What’s interesting is that the ABA has joined the act by releasing its LegallyMinded.com. The ABA Journal describes this network as “a combination of the best features of the top social networking sites and substantive legal data from the ABA’s deep library of information.”

New Planning Tool Available in Ohio

In the past, some people stated their burial preferences in their last will and testament. Although they were stating their intentions, that practice was ineffective. First, most funerals and the disposition of bodily remains would occur before the will was admitted to probate. Second, there was no legal authority holding that those wishes would be enforceable. Now, in Ohio, there is legal authority and practitioners and clients should be aware of this recent planning tool.

Ohio has enacted a statutory form for a person to appoint a representative to make decisions regarding the disposition of bodily remains and funeral decisions. The statute provides a prototype form.[1] The representative is, immediately upon the death of the declarant, vested with the authority to make these decisions.

Not all clients will necessarily feel that this form is necessary. These clients are comfortable that their family is familiar with their wishes and that they will follow those wishes. On the other hand, there are many situations where this form is ideal and people should be aware of its existence. Circumstances that might make this a useful tool are:
1. a second marriage with children from a prior marriage;
2. the client is unmarried and has no children;
3. the client has children who do not get along; and
4. same sex couples.

[1] See Ohio Revised Code Section 2108.72, with effective date of 10/12/2006.

Lawyers at Fault for Not Effectively Marketing the Importance of Wills?*

An article titled “Marketing Wills” is raising a mild stir among some bloggers. The article that appears in the Elder Law Journal, Volume 16, No. 1, 2008, suggests that many people die without wills because attorneys are not doing a good job of marketing them to the public. The authors, Michael McCunney and Alyssa DiRusso, propose that estate planning attorneys learn marketing basics and consult marketing experts.

This premise received a fair amount of attention on some legal blogs and at least one law firm marketing blog. The authors of these blogs disagree on the value of law firm marketing. I tend to take a more “middle of the road” view on the subject. Marketing the importance of wills might motivate some people to make an appointment with their estate planning attorney; however, for others it will fall on deaf ears. I agree with the view of the Legal Blog Watch to the extent that it states that most people are already aware of the need for a will. I disagree that the underlying reason that people do not have wills prepared is the cost. In most instances, it is not that expensive to have a will prepared.

As an estate planning attorney, I am aware of prospective clients who have mentioned the need for having a will, but have not followed through. They are aware of the importance. The cost is not prohibitive to them. It is just not high enough on their list of priorities. It may be that they do not see the urgency or it may be that they do not want to plan for their own death. It is not unusual to have a client make an estate planning appointment right before taking a long flight (overseas flights are very motivating for some reason).

* Thank you to David S. Bloomfield, Jr., Esq. for bringing this to our attention.

Quote of the Day

"You can't give what you haven't got"
- Maurice "Hank" Greenberg, former chief executive of AIG, explaining why charitable gifts from his foundation will be few and far between. Big Players Scale Back Charitable Donations, The Wall Street Journal Greenbergs family foundation's assets declined from $47.7 Million in February to about $4 Million in October.

Quote of the Day - Runner Up

"There's nobody on Capitol Hill who's been talking about rescuing the nonprofit sector."
- Paul Light, a professor at New York University's Wagner School of Public Service, speaking about the inevitable end of some U.S. charities.
Big Players Scale Back Charitable Donations, Wall Street Journal