Estate Planning for Humans

Most of the tools of estate planning (wills, trusts, etc.) are obsessed with taxes. Particularly estate taxes. Setting aside, for the moment, the fact that there is no estate tax for those dying in 2010 (see previous post), and the uncertainty of how it will return in 2011, the overwhelming majority of estates pay no estate taxes. The IRS estimates that only about 6,000 estate tax returns will be filed for those who died in 2009, when the exemption was $3.5 million. They also project that even if the applicable exclusion returns in 2011 at $1 million, only 1 percent of estates would be subject to the tax. With the estate tax affecting so few, why are estate planners so obsessed with it? Why don't planners spend more time thinking about what their documents actually say, how they are going to be implemented, how they interact with each other, and whether they really carry out the client's wishes?

Since it is much more likely than not that our clients will have no estate tax exposure (no matter what the law ends up looking like next year), perhaps now should be the time to refocus of our efforts on listening to the client, thinking about the implications of their wishes, drafting the documents to work with each other and carry out their wishes.

Let me give an example. The client has a piece of personal property that they wish to keep in family for future generations. Trust drafting considerations would be funding the trust so the property can be maintained properly, protecting the property from creditors, spendthrift children, as-yet-undetermined-future-former-spouses, etc. Perhaps these same considerations should also be addressed in the will and power of attorney, in case, for whatever reason, the house is not in the trust when your client dies. Another consideration is whether it is a good idea to keep the house in trust for future generations at all.

This is directed more at the CLE industry rather than planners themselves. We, as planners, already know that our clients have no estate tax exposure, and likely will never have such exposure. Lecturers, thinkers, and writers should perhaps spend greater efforts on the drafting component rather than the tax obsession. This would quite likely result in more readable (and likely shorter) estate plans that are much more likely to follow the client's wishes, reduce the chances of litigation, and improve the quality of our practice.