Why should you do estate planning in a down economy?

1. Business and real estate values may be down as much as 20% since last year at this time.  This creates opportunities for transferring the business, stock or assets to children or key employees at significantly less tax cost than prior years.  The transferor will use less of their lifetime annual gift exemption of $1.0 million or their federal unified credit of $3.5 million.
2. The capital gains rates are at an all time low –15% for most clients.  This low rate will not last in the face of trillion dollar deficits.  Corporations can redeem stock of the owners at this low rate and effectively transfer more of the company to their children or key employees.
3. The estate tax exemption and estate tax rate is likely to be decided this year.  The government does not want wealthy people dying in 2010 with no federal estate tax.  The best bet is that the $3.5 million federal exemption for 2009 will be extended to 2010 but nothing is certain given the freefall we have experienced in our economy.
4. State inheritance taxes are alive and well.  Oregon exempts only 1 million per decedent for the state inheritance tax.   That is not likely to change.  There are now higher exemptions for farm, forest, or fishing property provided the family retains and works the business.  If you have a $2 million dollar estate, the state inheritance tax is almost $100,000 on the second million.  That is real money that can be postponed until the death of the survivor with careful planning.
5. The old adage is true that we cannot avoid death or taxes.  Unfortunately most people spend more time planning their vacation than their estate plan.  Half of the population does not even have a simple will.  Couples in second marriages often have to deal with the children of the first marriage. Remarriage revokes your prior will.  Not planning your estate sets you up for will contests and inheritance fights. Even if you do not have a lot in the way of assets (my 401k just became a 201k) your heirs can wind up with even less.   Planning your estate will give you piece of mind and settle potential family disputes up front.
6. Spend some hard earned money now to save even more later.  Aside from taxable estates, probate fees can be reduced or avoided by setting up revocable living trusts.  While more expensive to setup than wills, trusts save thousand of dollars in probate fees.  While trusts still need to be administered, our experience is that the costs are a lot less than a probate.