This is my first column since the Island Sun stopped publishing after Hurricane Ian. I’m grateful to write again, missing the connection that I forged with many of you over the twenty plus years I’ve had the opportunity to express my thoughts on life as it applies to an estate planning context.
Many of you suffered loss. Some, sadly, lost their lives. I’ve personally spent more than $250,000 repairing my home with only a $4,800 insurance check to compensate, and the repairs aren’t complete. Yet, I feel lucky, as things can be repaired and replaced. My family didn’t suffer physical harm. Thankfully, I have the resources to do so as well, although my retirement has likely been pushed back a few years!
In addition to Ian, my wife lost her father (who was 90) just after Thanksgiving. Ronald had been in a memory care unit for three years, so his death wasn’t a surprise, but at the time of his passing her mother needed surgery (at age 87) and was in a rehabilitation facility. Rhoda faithfully visited Ronald every day until her surgery and was distraught she wasn’t with him when he passed. My wife Patti was (and still is) shuttling between here and Tamarac, a suburb of Fort Lauderdale, to care for her mother, who fortunately is recovering well.
There’s a silver lining in all of this. It’s my belief that tragedies serve as a wake-up call to our inner psyche. I find myself looking at everyone differently. Instead of getting frustrated with the stranger delaying my day as she struggles with her pocketbook in the Publix checkout line, I wonder what troubles she faces.
As the rock group R.E.M. sings in their 1992 ballad, “Everybody Hurts.” I encounter this daily in my estate planning practice. Just because someone has amassed wealth doesn’t mean that they lead a carefree life. Everyone has challenges, whether it’s overcoming illness, addiction, PTSD, phobias, past wrongs, or caring for a debilitated spouse, child, or other loved one, the list of problems is endless.
That’s life, isn’t it?
A good estate plan builds a legal and tax structure so that our hard-earned assets help us to withstand those problems. When we’re alive, well, and capable of confronting life’s challenges, we may feel that the planning isn’t all that important. It’s prudent, however, once we’ve accumulated wealth, to ensure that this structure is sound, not only for a time when we inevitably decline, but also to provide for our loved ones, to lessen their burdens.
There have been important recent developments in the legal world and in the tax law since I last wrote my column. Under Florida law, for example, there now exists a strategy known as a Community Property Opt-In Trust that may serve to completely eliminate unrealized capital gains upon the first spouse’s passing. This is something that I’ll write about in future columns. I recently lectured about this topic, comparing the laws of five states that have enacted similar laws, to an attorney conference in Las Vegas and am publishing a technical column on the subject in Trusts & Estates Magazine, a national trade journal for attorneys, CPAs and financial planners of which I’m on the editorial advisory board.
You may also have heard about recent federal tax legislation that mandates the withdrawal of inherited IRA and similar qualified retirement plan accounts within ten years. There are five exceptions to this rule, and there are also income tax planning opportunities for those not covered by the exceptions. Until recently, professionals believed that annual distributions were not required so long as the entire inherited IRA account was distributed within ten years. In 2022 the IRS published Treasury Regulations, issuing rules that mandate otherwise. This is another column that I plan to write.
Unless further legislation is enacted, the current federal transfer tax exemptions (gift, estate and generation skipping) will decrease from the present $13.61 million to an amount between $6.5 and $7 million when the current law sunsets at the end of 2025. Now, not waiting until December 2025, is the time to consider enacting strategies to protect your wealth from Uncle Sam. Good planning requires thoughtful deliberation, considering your needs, the types of assets that you own, your risk tolerance, and the emotional make-up of your loved ones. It’s not a “one size fits all” exercise.
A few weeks ago, I found myself sitting at a gate waiting to board a flight when a stranger engaged me in conversation. It turns out that he recently lost his wife and was traveling to meet his son, daughter-in-law and grandchildren for the holidays. He mentioned that he’s from Indianapolis and graduated from the same high school that I attended, as well as that of my mother.
“What year did you graduate?” I asked.
“1959” he answered.
“My mother graduated from that same high school in 1960.” I shared her maiden name with him. “Did you know her?”
“Why yes!” He answered. “How is she doing?”
“She died almost eight years ago at age 74 after an off-and-on twelve year battle against leukemia.” I answered. “Dad misses her greatly. They were married 53 years when she passed.”
“Yes, I miss my wife terribly,” he said, tearing up. “Christmas won’t be the same without her.”
@2024 Craig R. Hersch, Florida Board Certified Wills, Trusts & Estates Attorney, Sheppard Law Firm. Learn more at floridaestateplanning.com