Pay Attention to the Signs

Last week’s post explored themes covered by The New Yorker magazine’s article “The Getty Family’s Trust Issues” (Jan. 23, 2023). In writing the article, author Evan Osnos interviewed me for my views on current trends in estate planning. There’s a lot happening in the world of trusts, estates, and tax planning.

For over three decades, we have been living in the “Golden Age” of estate planning. As Osnos quoted me in the Getty article: “‘Conditions for leaving large sums have never been better,’ noting that ‘Congress has not closed an estate-planning loophole in over thirty years.’” However, in the world of my wise friend Mary Staudt, it’s time to “pay attention to the signs.”

Until recently, the estate planner’s tools in our golden toolbox were by and large flying under the radar. Then came 2021. As the pendulum started swinging from Trump-right to Biden-left, writers like Osnos began exposing our tools to the general public. Multiple articles in mainstream media began igniting a public outcry to “Tax the Rich,” as displayed in the photo of Rep. Alexandria Ocasio-Cortez’s met gala gown. Senator Bernie Sanders cleverly labeled his legislation “For the 99.8% Act,” asserting that the tax increases would only hurt 0.2% and would help 99.8%. Senator Elizabeth Warren touted her “Billionaire’s Tax,” which actually applied to anyone with a net worth of $100 million, but the “billionaire” label was more bombastic. Provisions such as these came within two votes of becoming law.

Political turbulence and anti-rich public sentiment are sending a warning call that one of these days “a change is gonna come” (to quote Sam Cooke). With that backdrop, here’s my take on current trends in estate planning.

1. Take advantage of “squeeze & freeze” tools to reduce estate tax while the opportunity exists. Those who complete planning before a law change will likely be grandfathered.
2. Engage in “Use It or Lose It” planning to lock in the $12,920,000 estate tax exemption before it cuts in half at the stroke of midnight on December 31, 2025 (when Cinderella’s coach turns back into a pumpkin).
3. Rising interest rates create a push to do a long-term lock-in of today’s low interest rates on intra-family loans but also make certain tools more attractive (such as Charitable Remainder Trusts and Qualified Personal Residence Trusts).
4. Inflation and the rising cost of living are motivating parents and grandparents to do more to help kids financially now, when they need it, as opposed to waiting until later to inherit. Ways to help include low-interest loans (such as home mortgages), annual $17,000 gifts, medical/education payments, Section 529 Plans, and gifts to Defective Grantor Trusts.
5. The economic downturn actually creates the ideal timing to do estate freeze planning such as 678 Trusts, SLATs, and DGTs. Resist the psychological urge to wait on planning until values recover, as pre-recovery planning beats post-recovery planning.
6. As a premier advocate for both “head” and “heart” estate planning, I note that the pandemic has stimulated a trend to engage in Family Legacy Planning. We became more aware of our mortality, prompting introspection: “To what end have I created this wealth?” Sheltering at home made it more difficult to sweep family dynamics/dysfunction under the rug, encouraging facilitated family meetings aimed at improving communication and trust.

While these trends are on the rise, many still fall victim to the greatest obstacle in estate planning—procrastination. I urge all to recognize that time is flying by, and with all the signs that “change is a-coming,” the passage of time is not our friend.

Marvin E. Blum