Growing up in Indianapolis, my family was close to my maternal grandparents who owned retail men’s wear stores. My father joined the business, as did my uncle, who operated both a men’s and women’s clothing store. Between the family members there were six locations in the metro Indianapolis area.
My grandfather was a man of small physical stature but had a large personality. Standing at a mere 5’5” and weighing, I would guess, approximately 130 pounds, he wore size six shoes.
Every evening coming home from the store, he would enter his home. He wouldn’t talk to anyone until he finished his post-work ritual of walking slowly over to a wet bar that he kept in the living room, placing his hat on the stand, hanging up his overcoat, and removing his gloves. He would pour whiskey from a crystal decanter into a shot glass, take the shot and then light up a cigar.
One evening when I was about nine years old, I was over at my grandparents home excited to share my day with my grandpa before going together to an Indiana Pacers (then in the ABA) basketball game. I couldn’t wait to talk to him, anxiously standing next to the wet bar as he finished his routine.
As he lit his cigar I opened my mouth to talk, but he put his index finger over his lips shushing me. Bending down to my level he pulled me, by my shirt collar, close to his face and said, “Craig, never go into retail. But if you ever have anything to do with death or taxes, you’ll ALWAYS make a living!”
And that’s when I decided one day to become a trusts and estate attorney!
But are taxes still a big deal for someone like me? As most of you are probably aware, the new tax law signed by President Trump increased the estate tax exemption to $11 million per person. A married couple may now shield $22 million from federal estate tax. At a lunch the other day a CPA asked me, “Is there any reason for someone to plan their estate anymore?”
I answered, “Certainly! Too many clients confuse estate TAX planning with ESTATE planning. Even before the new exemption limit many people didn’t fall into the federal estate tax threshold that was $5.5 million per person.”
What are the reasons to do estate planning, you might ask? There are several. A good estate plan considers who will take care of your affairs, both health-wise and financially in the event that you are unable to do so for yourself. With revocable living trusts that is commonly your successor trustee as well as your agent under a durable power of attorney for assets held outside of your trust. The powers and functions of that office must be carefully thought through. Furthermore, how your trustee is to act requires careful drafting inside of an estate plan.
Privacy is another issue today. Rampant identify theft is something all must now guard against, so having your estate a public affair, as would happen when you die with a will, is not wise. Many people don’t realize that when they die with a will and not a trust, their individual assets will only be transferred to their loved ones through a public probate process. Probate doesn’t refer to taxes, rather it is a legal process, and in Florida one must have an attorney to represent you in a probate process. Contrast this with New York, for example, where residents can administer a probate without a lawyer. This points to the differences in state laws and how important it would be to update your legal documents to Florida law when you become a resident here.
That brings me to discuss yet another point: ancillary probate administrations. Clients who own real property in different states and do not have a fully funded revocable living trust run the risk of having two probate administrations, one here as your domicile and another in the state where the real property is located. While many new clients that I meet with already own revocable living trusts, almost none of them have transferred all of the assets that would otherwise be subject to probate into their trusts.
Finally, income taxes aren’t going away. A greater percentage of clients have their net worth comprised of qualified retirement accounts like IRAs, 401(k) plans and 403(b). These assets have income tax issues that should be well thought out. For more on this subject visit my firm’s website www.sbshlaw.com where I’ve recorded a podcast episode.
Grandpa was right. Even in an age when the estate tax appears to not affect many, there are always reasons making it necessary to take care of death and taxes.
And in an age of amazon.com, quite frankly, I’m glad I’m not in retail!
The Sheppard Law Firm is located in Fort Myers and Naples by appointment.
© 2018 Craig R. Hersch. Originally published in the Sanibel Island Sun.