The vast majorities of entries on this blog have dealt with and will continue to deal with estate planning, estate administration, asset protection and the like. Sometimes, however I deviate from the world of writing about living trusts and wills and this is one of those times.

George Blanda passed yesterday at age 83. As a young child I knew that George Blanda was amazing. I remember sitting at home as an eight year old in 1970 and watching him win game after game for the Oakland Raiders as a 43 year old quarterback and kicker. While I did not remember the specifics of his heroics that fall until I read about them today, I do recall that this guy who was older than his coach was winning games seemingly single handedly for his team.

He was amazing because at that age I knew that he was older than my own father and he was competing against people in the prime of their athletic careers. If for some reason you think that it was easier forty years ago (it was probably harder), know that he kicked a 52 yard field in the final seconds against Cleveland. That rarely happens today!

George Blanda’s success instilled in me early an appreciation for the potential we all have and also an appreciation for those that are great whether an athlete, a doctor, a scientist, a teacher, or even a lawyer. He and others taught me to continue striving and to give it your all. I realized early on that I was not going to be the best in anything, but that perseverance has its own rewards.

George Blanda played in the NFL through the 1975 season. When he retired he was 48 years of age and could still compete. Simply remarkable!

The attached article from Forbes.com discusses some of the problems with do-it-yourself estate planning. As I have written about before, some of my colleagues fret about the loss of business in the short term from people utilizing on-line services to prepare their own estate planning documents. I take a more long term approach and realize that a large percentage of these documents are going to result in problems and a fair amount will result in litigation. Therefore, over time estate planning attorneys who do estate and probate litigation will benefit from this phenomenon!

Read the entire article here:

http://www.forbes.com/2010/09/07/do-it-yourself-will-mishaps-personal-finances-estate-lawyers-overcharge.html?partner=alerts.

Consider yourself warned! I always tell my clients “you don’t know what you don’t know!”

Abigail Disney is a granddaughter of Roy Disney, Walt’s brother. She was born into wealth and she attended some prestigious universities. She is considered a progressive politically which is another way of saying that she is liberal. She is a filmmaker, but not a filmmaker of films that by and large make money.

In the USA Today, she has authored an op-ed wherein she states that the estate tax is the fairest tax that we have and that she is all for it. She justifies the estate tax by indicating that it is not a double tax. She contends that multi-millionaires do not become that way by earning a weekly paycheck, but rather by investing. I guess she does not know that there are plenty of businessmen and women, doctors, attorneys, athletes, entertainers, and others who have amassed a few dollars by working and even if they had never invested a penny would be subject to the estate tax.

She next argues that she is not aware of any farms that will be broken up because of there being an estate tax. It is true that there are farmers who engage in extensive estate planning who have been able to pass down the family farms, but there are certainly more that have had to sell to prepare for the estate tax. I wonder how much research Ms. Disney did on this issue and whether she contacted any estate planning lawyers in farm areas or talked to farmers or their heirs. I have a feeling she would be surprised.

Finally, she argues that the estate tax incentivizes people like her to do good with her wealth. One can argue as to whether society is benefitting by her use of her wealth and whether it would benefit just as much if she spent her money in other ways.

She does not seem to want to pay the estate tax herself. Rather, she utilizes the tax code that allows for her filmmaking and her foundations and states that she is doing good with her money. I guess her argument is if you have not created a foundation or engaged in non-profit work such as making films, or you have not given the money to charity, pay the estate tax regardless of what the rate is and know that she thanks you for it.

She obviously does not want to give her money to the government. Rather, she wants people who have not used the tax code as effectively as she has to do so. Interesting!

We, as estate planning attorneys, do our job by effectively providing advice to people to reduce their estate taxes. Ms. Disney, who argues against aristocracy and for a meritocracy, but has kept the Disney name, has certainly provided a couple of legal ways to “beat the system.”

There is an article that appears in the August 18, 2010 edition of the FA News that details what four of the preeminent IRA experts in the country are doing with their own IRAs. I thought it would be helpful to share the details of the article as well as intersperse my own commentary.

As estate planning attorneys, I have many clients that come to my office with fairly substantial to substantial amounts in their IRAs. In fact for some clients, it is their biggest single asset.

As many know, beginning in 2010, people with any income level can convert their regular IRA to a Roth IRA. With that in mind, FA News decided to poll four IRA experts.

Ed Slott, is probably the most famous to the general public of the four as he hosts a national show on PBS and has written at least four books on IRAs. He is a CPA by training, but now devotes himself to training financial advisors and others about IRAs. He is 56 years old and lives in New York.

He indicated to FA News that he converted nearly all of his six-figure IRA at the beginning of the year. He, with the assistance of an advisor, separated the funds into a half-dozen Roth accounts. This was done so that if one of the accounts had a loss in value he could recharacterize the fund as late as October 15, 2011.

He did leave a very small amount in his regular IRA so that in the event that he reversed a conversion he would already have an account open. This would reduce paperwork.

Natalie Choate has written a book on IRAs that I and many other estate planning lawyers as well as many tax attorneys keep on their bookshelf. She is 64 years old and practices law in Boston. She indicated to FA News that she switched a low-six-figure amount to just one Roth account in early July. By switching, she and anyone else who does so, starts the five-year clock. One of the rules is that before one can take tax free withdrawals from a Roth IRA, the owner generally must be 59 ½ or older and have had the account for at least five years.

Ms. Choate, while dreading paying the conversion taxes, is going to pay them this year. She indicates that writing a five figure check to the IRS has been keeping her up at night.

Seymour Goldberg is a retired college professor and an attorney who lives on Long Island. He, according to the article, will make a partial conversion of assets if the market decreases sharply. He has been earning nearly a 5% yield from a retirement account. To convert to a Roth would mean removing assets from this account, so he is being careful.

Finally, Robert Keebler is a CPA in Green Bay who lectures frequently to attorneys on IRAs and other tax issues. In fact I saw him speak just last week at an estate planning conference in Chicago. He has yet to do anything, but intends to convert about 20% of his retirement assets this year. He is leaving the rest in his accounting firm’s pension plan because he believes it provides better asset protection under Wisconsin law.

He too will work with his broker to convert during the market’s next tumble. He will time his state tax payments to make sure that they fall in the same tax year as his federal tax; he does want to trigger any alternative minimum tax the following year.

Four experts on IRAs and four slightly different answers when it comes to their own personal situations. Talk to your planner; to your CPA and to your estate planning attorney. Make an educated decision.

The only question I have is how will Goldberg and Keebler determine that the market has tumbled enough for them to convert?!!

Have you thought about that question? When a client comes to see me as there estate planning attorney about preparing an estate plan including a living trust, a will, a power of attorney, advance health care directive, etc., it is something that I have started to ask about.

Honestly, I have not done anything myself yet. As many of us do, I have emails sent to me at four sites; I have financial records sent to me from a variety of sources – and they all require a password. I have business records and personal records all over the place. What about the fun things? Facebook? Linked In? or whatever follows?

What is my successor trustee and/or executor to do upon my death? Moreover, are there things on my computer that I really do not want anyone to see? Will someone see those things? These are some of the questions that you need to think about and answer.

There are more than a couple of tools available on the internet and websites to assist you in implementing your desires. I suggest that you take a look. You may want to consider putting virtual asset information on a flash drive and storing it in a very secure place.

Most importantly, whatever you decide to do, you must, one way or another, inform your successor trustee and/or executor. This can be done, the old-fashioned way, on paper.

George Steinbrenner was at least the third billionaire to have died in 2010. He was the most famous due to his ownership of the New York Yankees baseball team. As virtually everyone knows by now, there is not any estate tax for those dying in 2010, or so we think.

Some senators actually are proposing that there be a retroactive estate tax. However, right now everything is up in the air. As the way things stand, the Steinbrenner family is the beneficiary.

However, if the family decides at some point to sell the Yankees, there will be a hefty capital gains tax to pay. Mr. Steinbrenner’s basis in the Yankees parent company is approximately $10 million dollars and his ownership share is 55% of approximately $1.6 billion dollars. On the other hand, some would argue that from a purely mathematical point of view, now would be a great time for the family to sell the Yankees because the capital gains tax rate is as low as it is ever going to be!

Most people think that the Steinbrenners will continue to own the Yankees and put off dealing with estate taxes and capital gains taxes for a number of years.

While the vast majority of people do not have these issues to contend with, it does make sense to understand the tax implications of your estate. Consulting an estate planning attorney is usually a very good thing. Estate planning lawyers deal with these issues daily.

For the most part, the results of our work are not seen by our clients. When we prepare an estate plan for someone, it is generally not implemented until the client’s incapacity or death.

What other professions is that true about? You go to the accountant or to the doctor, or to the dentist, or to the mechanic – well you get the picture – and you see the results fairly quickly. When you ask your friends for recommendations or read recommendations on the internet for those professions and most others, you are talking with people who have experienced the results of the work – not just the process of the work.

In my profession, people can recommend me because they liked “my bedside manner” or they enjoyed the process, but they are taking it on trust that I have designed an estate plan that works well.

It is why many people make a determination on their estate planning based upon price. They do not know what they do not know so they call our office and ask how much we charge. They generally would not select a medical doctor in that way, but to have their living trust or will done, they vary well may.

Even wealthy clients fall into this trap or decide to put off planning. That is why as they get older, they begin to sell assets that they would like to keep in the family, but that they do not have the liquidity to keep and to pay the estate tax.

I frequently use Sam Walton as an example of a great businessman who understood that it was not just about building, but also about retaining. Not only did he build the biggest company in the world and become at the time of his death in 1992 the richest (or second richest) man in the world, but he engaged in estate planning from the beginning of the creation of Wal Mart.

His family – he had a wife and four children – benefitted immensely. From 1992 until 2005, five of the ten richest people in the United States were the Waltons. This was true despite upon his death there being an estate tax rate of 55%.

Sam Walton was proactive in his estate planning. In fact he utilized GRATs (Grantor Retained Annuity Trusts) to such a degree and in such a manner that there is now in the estate planning community a special type of GRAT known as the Walton GRAT.

The important point to understand is that estate planning attorneys can be of benefit and not just for the very wealthy. We can structure estate plans for people that do not have taxable estates so that their children’s assets are protected from divorce, creditors, lawsuits, and their own spending.

Many people want to help out family members while they are alive while at the same time wanting to reduce the size of their estate. The easiest way to do this is to give $13,000 per person to as many people as you want. Thus a couple can give $26,000 per year to a person. For most people, a few years of doing that be more than enough to decrease the chance of estate taxes.

There are some people with significant wealth. They have to engage in more “sophisticated” estate planning. While it does not sound that sophisticated, they may wish to give larger gifts. In addition to the $13,000 annual gifts, an individual can give away $1,000,000 over his or her lifetime without incurring a gift tax. By getting money out of the estate, the growth of that money is not subject to estate tax.

What about for very wealthy people? Are gifts still a good thing? Many would argue yes. Currently our gift tax rate of 35% is the lowest it has been since 1934 when it was 33.5%. Next year the rate will be 55% unless a new law is passed. Therefore, if someone wants to give away $1,000,000 (and has already used up his $1,000,000 lifetime amount) he would have to pay $350,000 to the federal government. On the other hand, if he leaves the amount in his estate and dies with a taxable estate and the estate tax rate is at 55% as it is set to be in 2011, then it will take over $2,000,000 to get his heirs $1,000,0000. In other words, it makes a lot of sense to gift the money now.

However, many very wealthy are not doing this. For some, the idea of paying any taxes to Uncle Sam goes against the grain. They believe in avoiding taxes or deferring them. Many have been able to do that with their income taxes. For others, giving away a large amount of money is worrisome. Many are scared they will run out of money.

I tell all of my clients that come to my office for trusts, wills, asset protection, and sophisticated estate planning to think about gifting. It is a powerful tool!

Q. Is an IRA protected from Bankruptcy for the Original Owner?

A. The short answer is “Yes”. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection was enacted. Under that law, all types of IRAs are bankruptcy protected. Typically if an individual files for bankruptcy protection, he/she can keep the IRA (regardless of what kind of IRA it is) from his/her creditors in bankruptcy court.

Q. Is an inherited IRA protected from Bankruptcy?

A. The short answer is “Maybe”. In a 2010 Minnesota case a woman filed for bankruptcy only four months after she had inherited an IRA. The Minnesota bankruptcy court ruled that “transferred amounts did not lose their character as retirement funds.”

Contrast the Minnesota bankruptcy court with an Eastern District of Texas bankruptcy court ruling also in 2010. In that case the court held that the funds in an inherited IRA are not intended for retirement and therefore were not protected from creditors in bankruptcy proceedings.

So what should an IRA owner do to protect his IRA from the potential of an heir filing for bankruptcy. Probably the best thing one can do is to name an IRA Inheritance or Inheritor’s Trust as the beneficiary – some may even call it an IRA Beneficiary Trust with someone other than the heir as the trustee.

A knowledgeable estate or trust lawyer can discuss this with you. Attorneys who practice in this area of law can help IRA owners make the correct decision with their IRA.

In my estate planning practice, I continually receive questions about what I think Congress (the House and the Senate) will do concerning the estate tax. I always say “no one knows”. This article, although almost a month old, demonstrates my point!