Managing change, our only constant, is for some natural and for others an increasingly difficult task. When raising families, succeeding in careers or entering stages of life such as retirement…..we step in to a circumstance and manage through it. If we are visionary, we see it first and plan for it. Developing your legacy is a lifetime journey and passing it on can be limited to a one-time challenging event. This is true whether we talk of intangible things we pass or financial assets to family, friends and colleagues.
In this world of many options, your legacy planning is a journey for your family. It need not be a crisis, in many cases it is a time when families come together and appreciate the gift of values, philosophies, experiences, parenting and financial successes that are being entrusted to them. In some cases, families have tested the waters to see how well they might work together, for example with a Charitable Fund or Foundation, a business/investment venture or a dynasty trust established during a lifetime, to name a few premier choices.
Your professionals are a resource for you. The value of their time and yours is to join your personal legacies and family history with the journey you wish to have continued when you pass on your financial legacies. With over 5000 tax law changes in the last 20+ years, the technical side is best left to the professionals, but your active and meaningful preparation in composing your estate plans do make the difference; bridging effectively your thinking as you solidified your planning with the actual passing on of the financial estate to your heirs.
Whatever your desires, be flexible where it is needed, and perfectly defined and specific where required. Of most importance, evaluate your family members’ capabilities and desires to serve specific rolesor inherit specific assets. Sometimes a parent’s understanding of what their child’s role should be changes dramatically when further discussion ensues.
Our current estate tax statute stems from a bill that was passed in 1916, but the estate tax law began early in 1797 when revenue was needed to finance the crisis with France. It was imposed on legacies and personal property that passed on without a will. In 1802, when the crisis ended, the tax was repealed only to be reintroduced much later during the Civil War era in 1862. The complexity continued adding a stamp tax on probate. In 1864, a succession tax on real property was added, only to find both taxes repealed by 1872.
During this time however, the concept of limited exemptions was introduced. Minor children were allowed an exemption up to $1,000. Congress, 22 years later added the inheritance tax imposing taxes on gifts and inheritances. This was in 1894 and was included with the tax imposed on interest and dividends in US Banks. The Supreme Court found this tax unconstitutional and shut it down, only for Congress in 1898 to pass another inheritance tax whose purpose was for military emergencies, repealed in 1902.
The exemption at this time was $10,000 for spouses and estates. Our current bill stems from the tax statute passed in 1916, followed by the introduction of the gift tax in 1924 (repealed 1926). In 1932, Congress passed the foundation of the Gift Tax law we know today, combined with the unified credit rules in 1976. And the list goes on for tax enactments and subsequent repeals.
Change has always been a constant. And nothing is different when it comes to policies and taxes. Seek out your attorney’s advice as to how best he can draft your wishes and be sure to tie everything together with your family advisor.