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How Will the Tax Relief Act of 2010 Impact Your Estate Plan?

Client Alert - January 9, 2011

By Wayne C. Buckwalter

On December 17, 2010, President Barack Obama signed into law The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Act).  The compromise legislation became effective on January 1, 2011, but is only temporary, as most of the new tax provisions expire at the end of 2012.

With the many changes taking effect and the uncertainty about what could happen to your estate, it's more critical than ever to revisit your existing estate plan, or create one. If you don't, the changes could result in your assets not being distributed according to your wishes or your family paying unnecessary taxes. Additionally, without an up-to-date estate plan, the distribution of your assets can become a time-consuming and costly financial challenge for your loved ones and survivors.

How will the Act impact your estate plan? Let's begin with the following questions:

Do you:

  • Have an existing estate plan that was developed before the estate and tax exemption became $5 million per individuals and $10 million per married couple?
  • Simplifying and consolidating your plan may help you prevent unnecessary administrative costs and other burdens.
  • Own real estate in more than one state?
  • A revised plan can help you avoid complicated multi-state probate.
  • Have beneficiaries with a disability or other issue? 
  • An updated plan can provide protection for that individual and ensure that they are eligible for government provided benefits.
  • Have a significant portion of your investments in a retirement plan?
  • An updated plan can ensure that your retirement income savings are properly structured to defer income taxes for you and your heirs.

It is extremely important to speak with an attorney about updating your plan at least every three years and any time you have major changes in your life such as births, deaths, marriage or divorce, as well as significant increases or decreases in the size of your estate.

What happens if you don't have an estate plan?

Estate planning is a very important component of everyone's financial planning, regardless of the size of the estate. It is the only way to control what happens to your assets if you become disabled or pass away. You can't just talk about estate planning because verbal agreements aren't legally enforceable. You need to contact an attorney and put it in writing. Additionally, estate planning is a financial process that can protect you and your family, and is a very important component of your overall financial planning. If you don't have an up-to-date estate plan and you get hurt or sick and are unable to manage your financial affairs, the court will appoint someone to manage them for you. The person they appoint might not be someone you would want to perform those tasks.

Without an estate plan, your affairs will be settled by default through a complex legal system called the intestate laws. As a result, the handling of your financial affairs can turn into a costly and frustrating ordeal for your family and/or heirs.

The Act is complex and there are many contingencies to consider. To develop an estate plan, or for a complete review of your current plan and update in light of the Act, please contact Wayne Buckwalter at (215) 564-1700 or wbuckwalter@cohenseglias.com.

Wayne C. Buckwalter is a partner at Cohen Seglias and Chair of the firm's Wealth Preservation Group.  Mr. Buckwalter’s practice emphasizes innovative estate and business succession planning, including the creation of revocable trusts, life insurance trusts, wills, charitable trusts and gifts, private annuity plans, qualified residence trusts and family limited partnerships. In November 2010, Mr. Buckwalter was named a FIVE STAR Wealth Manager in the area of estate planning by Philadelphia magazine.