HECKERLING INSTITUTE 2001
REPORT #1
As we did in January of the last four years, and again with
the permission of the University of Miami School of Law Center for Continuing
Legal Education, we will be posting to this list throughout the coming weeks
highlights of the proceedings of the 35th Annual Philip E. Heckerling Institute
on Estate Planning that is being held January 8-12, 2001 at the Fontainebleau
Hilton Resort and Towers in Miami Beach, Florida.
Our on-site local reporters there in Miami this year will include:
Steve Leimberg Esq. of Bryn Mawr, PA - leimberg@home.com
Bruce Stone Esq. of Miami, FL - Brucestone@aol.com
Eugene Zuspann Esq. of Denver, CO - ezuspann@zuspann.com
Julia Fisher Esq. of Philadelphia, PA - JuliaFisher@ewgf.com
Alan Rothschild Jr. Esq. of Columbus, GA - ar@hatcherstubbs.com
Joe Hodges Esq. of Denver, CO - jghodges@jghlaw.com
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Again this year a complete listing of the proceedings and speakers is
available on the Institute's Web site. The new URL for that site is
<http://www.law.miami.edu/heckerling>
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REPORT NO. 1 - Monday, January 8, 2001
First, our super-sluth when it comes to the vendors and things technical, Reporter
Gene Zuspann, has filed the following Report on his Monday visits to the Exhibit
Hall:
As the size of the institute grows, so do the number of vendors. 99 vendors
are now listed in the Registration list. There are multiple vendors in almost
all categories.
The categories that are apparent are:
Administration support services such as deed preparation
Appraisal and valuation companies
Auction houses
Book and reference material sales
Missing person locators
Software sales - these include software for planning and administration.
Trust departments/companies and other companies managing assets
And now for some highlights:
Collaborate! is a web based company that allows all of the parties to the estate
planning team and the client to work out an estate plan and the documents. Each
participant loads documents and other information to the web site. The client
determines which members of the team can see which parts of the information.
For instance, the will, prepared and posted by the attorney, could be reviewed
by the client, the client's tax advisor, but not the insurance agent. The goal
is to speed up the process from the start to the finish of the EP engagement.
Collaborate!'s site is supposed to be up in March at http://www.collaboratefinancial.com/
ProDoc is one of the popular document preparation
system. The do forms for several practice areas in Texas and Florida and the
Probate Court forms in Colorado. ProDoc uses a proprietary engine and most programming
in the past has been by ProDoc. They are currently working on an update
for all of Colorado's pending new Guardianship and Conservatorship forms now
that the new Uniform Act became law there effective 1/1/01, and they just recently
shipped their most recent update of all of the Colorado Probate Court forms
for the new required caption format as of 1/1/01.
LawOnTheWeb.com has just developed and released a new project between Natalie
Choate and Jonathan Blattmachr. They are offering several new products,including
BenDesi, to assist estate planners in planning for their clients' retirement
benefits, and Distribuguide which explains what options are available under
the minimum distribution rules for distribution of a decedent's retirement benefits.
More information is available at www.LawOnTheWeb.com http://www.lawontheweb.com
. Rumor has it an Elder Law system is also
under development at this time.
ProBATE Software, from Greeley Colorado has a fully integrated estate and trust
administration package. The package includes programs for estate planning calculations
and presentations, Forms 706, 709 and 1041, and trust accounting, plus a new
NAPTA Web link. This suite of programs is a competetor to Zane & Associates,
Lackner 6-in-1, TeDec and West Group. Lee Zane, Vince Lackner and West Group
are also exhibiting, although Tedar Brooks is just finishing his windows product
and it is only available thru their TeDec web site. Faster Systems is
also here exhibiting its Faster fiduciary accounting package this year.
Most of the regulars are also here, including:
Nicole Splitter, with U.S. Trust, with their new EPLAN Software. This was reviewed
in the October, 2000 issue of Estate Planning Magazine.
EVP valuation systems, which has just released the CapWatch product. This can
downloaded from their Web site and is included in the current version of the
EVP product. We'll report on some of the other valuation companies later.
++++++++++++++++++++++++++++
Next, and as an add on to the above re LawOnTheWeb, Reporter Gene Zuspann also
reports the following about Natalie Choate's Monday morning three-hour "Fundamentals"
program:
I attended the Monday morning presentation by Natalie Choate on "The fundamental
of Estate Planning for Qualified Retirement Plan Benefits and IRAs: What to
do in real life."
As normal, the materials are quite extensive - 93 pages of materials with another
27 pages of appendices. Two sections of the materials - Understanding the Minimum
Distribution Rules and Case studies are from her book "Life and Death Planning
for Retirement Benefits." The other two sections were written just for this
institute. There were a large number of attendees at this presentation,
even though it is supposedly a fundamentals program, so the interest in the
program was quite high.
Her first topic was "Ten Things that make Planning for Retirement Benefits Different
from Estate Planning for Other Assets." This one of the new topics not in her
book. She said that this follows the "Dummies" how to books, however, it actually
consisted of 16 so she stuck 6 topics in other #10 - Special Planning Opportunities.
She started the presentation with a caveat: Never be in business with your spouse.
In the first part of the session - from 9:00 to 10:30 - she covered the differences
in Section I of her outline and the general rules. She
extensively discussed the Minimum Distribution Rules for the various possible
scenarios, i.e. participant alone, participant and spouse, participant and non-spouse
individual, etc. She also covered the Required beginning Date rules.
One recommedation: where the younger generation beneficiaries are already wealthy,
and do not need the money, and the client is not using the money in the IRA,
leave it to a foundation and avoid both the death taxes and the income taxes.
After the break, she covered several of her 26 case studies. She finished with
the results of a survey of the methods used by a number of the experts in the
area in planning for distributions from large plans. These include:
-Use fixed term for both the spouse and the participant. This method ensures
certainty regardless of the timing and order of death between the spouse.
However, this feels this may be a disservice to the client, especially if the
actual life expectancy of the client and spouse are considered. Taking into
account the family history of the client, and the fact that non-smoking, well
educated persons in good health will often outlive the tables, there may be
better methods. Several alternatives are:
-Use recalculation of lives on the spouses and a charitable remainder trust
as a contingent beneficiary.
-Use the split method - a fixed term on the participant and recalculate the
spouse.
-Hedge your bets under Notice 88-38. Split the money into 3 IRAs and use a different
option on each of the IRAs. When the client is ready to take money out each
year, evaluate which IRA would be best to deplete. This gives the client the
flexibility to choose the best alternative taking into account the facts and
circumstances at the time of the withdrawal during each year in the future.
All in all, a very good presentation. As always, her presentation included some
good humor and kept the audience interested.
+++++++++++++++++++++++++++++++++
Third, Reporter Steve Leimberg has filed the following Report regarding Jonathan
Blattmachr's portion of the Monday afternoon "Recent Developments" presentation.
Here's to the Lossers! That's a line from an "Old Blue Eyes" tune. Jonathan
Blattmachr and Professor Mitchell Gans put a new twist on it - just when it
appeared everything that could be said about the subject already had.
I'm referring of course to the subject of Wealth Transfer Tax Repeal.
Jonathan and Mitchell's perspective, presented as part of the Recent Developments
opening segment at the 35th Annual Heckerling Institute makes the following
interesting points that perhaps many folks missed in the crunch
of the sound bites on both sides of this important issue:
The proposal to repeal the estate tax can't be justified on the basis of a slowing
economy (even assuming fiscal stimulus is both a necessary and effective tool
to warm up a cooling economy) since it would do nothing to produce an immediate
tax savings for taxpayers with a propensity to consume most, if not all, of
their tax savings.
Repeal goes beyond merely the estate tax. Its triple whammy would include the
gift and GST as well. And coupled with a proposed significant reduction in income
tax rates, the result is likely to produce four major losers: (1) the life insurance
community, (2) charities, (3) spouses, and (4) states.Life insurance companies
would be hurt because of what is called "adverse selection". In other words
those who perceived they no longer needed insurance because of a repeal - but
who were healthy - would drop their
coverage - while those who were sick would retain the coverage - thus taking
away from the insurers the (already counted upon) advantage of a pool of healthy
insureds who continue to pay premiums. (On the other hand, Jonathan mentioned
that, the enhanced relative advantage of the tax-free build up inside the policy
would encourage high-net worth high income individuals to retain or purchase
cash value life insurance and to some degree, counterbalance the policies lapsed
because of repeal).
Charities would be hurt - badly - because both estate tax and income tax incentives
would be removed. With a reduced income tax furthering the loss of incentive
to make charitable gifts, direct bequests at death as well as lifetime giving
will likely diminish. Worse yet, according to Jonathan, charities would have
to depend on the federal and state governments to make up some of the difference.
He fears this would result not only in shortfalls in operating revenues but
more importantly in an expanded role of the government(s) in "picking winners".
In other words he worries that philanthropy may become controlled by governments
to the point of being "rampantly politicized". And of course, with respect to
religious charities, direct governmental financial assistance is probably
unconstitutional.
Spouses will lose because the state legislated protection for surviving spouses
which provides a minimum share of a deceased spouse's estate (e.g. right of
election ) serves as a protection only to the extent there's something to share
(typically 1/3) IN THE ESTATE. Without a gift tax, it will be easy (and less
expensive) for a moneyed spouse to give away assets and thwart the intention
of protective state laws.
Of the three major loses, states would suffer most. As a recent Tax Analysts
article suggests, states stand to lose a lot of money - year after year. Jonathan
estimated over $100 billion over the next 10 years would be lost. He noted that
it may be politically impossible for the states to adopt independent estate
tax systems to make up the loss and few would have easy mechanisms to replace
the revenue lost if the states could no longer impose a death tax equal to the
state death tax credit (which EVERY state currently does).
Perhaps the most interesting part of the Blattmachr/Gans commentary, the impact
of the repeal of the gift tax, has been the least commented on by other authorities
- and may prove to be the most important issue of all - because of its implications
on both federal and state income taxes - and because of the significant increase
in the real cost of repeal. Think about the following:
First, it would be easy - without a gift tax - for a taxpayer in one state to
shift income to a trusted relative in another state, one with no or a lower
state (and/or local) income tax - and at some "old and cold" date - that trusted
relative gives the income producing property back. Likewise, a gift tax free
gift of appreciated property to a lower bracket relative - say a daughter -
or retired parent - who sells the property and pays a much lower tax than the
donor would have paid - followed by a conservative period of time - followed
by a gift back to the donor of the net proceeds.
Second, trusts - deliberately created in states which do not impose a state
income tax on trust income(such as Alaska, Delaware, Florida, Nevada, South
Dakota, Texas, Wyoming, or Washington) could be "packed" with income producing
assets to eliminate state income taxes.
As Jonathan put it, "Little tricks" will be developed to minimize income tax
on the return of that money to the grantor. So just as taxpayers will
try to avoid federal income tax once the barrier of gift tax is removed, so
will they try to reduce their state income tax
through various income shifting methods. Jonathan pointed out that this potential
to "GAME THE SYSTEM" will be difficult to police or to create laws that
would prevent or minimize the loss of either state death or income tax revenue.
The conclusion of the Blattmachr/Gans Heckerling Current Events commentary is
that the loopholes and deficiencies inherent in current law can - and should
- be fixed. But they feel "repeal would be the wrong remedy." They suggest instead
a substantial upward revision in the size of the exemption or exemption equivalent
available to all taxpayers and a significant increase in the size of the GST
exemption.
That is it for Report No. 1. The full text of all the Reports will be
posted on the ABA RPPT Web site at http://www.abanet.org/rppt
beginning early next week.
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MIAMI INSTITUTE GENERAL INFORMATION:
Inquiries/Registration:
Philip E. Heckerling Institute on Estate Planning
University of Miami School of Law
Center for Continuing Legal Education
P.O. Box 248087
Coral Gables, FL 33124-0201
Telephone: 305-284-4762 / FAX: 305-284-6752
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Headquarters Hotel - Fontainebleau Hilton, Miami Beach, FL
Telephone (305) 538-2000, FAX (305) 674-4607
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NOTICE: Although audio tapes of all of the substantive session
at the Miami Institute currently are only made available to Institute
registrants for purchase, the entire proceeding of the Institute are
published annually by Lexis/Nexis. For further information, go to
their Web site at <http://www.lexis.com/>.
The text of these proceedings is also available on CD ROM from
Authority by Matthew Bender. For further information, contact
your Matthew Bender sales representative, or call (800) 533-1637,
or fax (800) 828-8341, or go to URL <http://www.bender.com/>,
or
write to Matthew Bender & Co., Inc., Attn: Fulfillment Dept., 1275
Broadway, Albany, NY 12204.
___________________________________________________________
Joseph G. Hodges Jr. Esq. , Denver, CO - ABA-PTL List Co-Moderator
jghodges@jghlaw.com
<http://members.iex.net/~jghodges>