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Are Your Affairs in Order?

Estate Planning for Lawyers: Updating Your Documents and Planning for Impending Tax Law Changes

By Paul Speca

Although the pandemic has affected the legal industry in a multitude of ways, there’s no question that the surge in demand for estate and end-of-life planning legal services stems from the realization that no one is invincible in the face of COVID-19.

Estate Planning Pointers

Amid a public health crisis, everyone is vulnerable — not just the elderly. Even young people need to get their affairs organized and document their wishes if they were to experience long-term disability, incapacity or death — and so do their lawyers.

Updating Your Estate Planning Documents

There’s no time like the present for lawyers to practice what they preach. Reviewing and updating your own estate planning documents to reflect your current personal and family situation gives you the peace of mind that you and your loved ones are protected. Further, impending federal tax law changes may merit strategic adjustments.

I recently spoke with Peggy Sheahan Knee, principal of the Knee Law Firm and LexisNexis Practical Guidance contributing author, who said the pandemic was a game-changer for her law practice.

“I was absolutely shocked at how many people reached out to us about not having documents like health-care proxies, advanced directives and durable power of attorney,” she said. “In the past, I found people were generally resistant to the idea.”

Not anymore — clients are more than ready to talk through scenarios and pull together the paperwork. Many of the calls she receives are from worried parents of minor children who previously had no estate planning documentation. With the realization that no one is safe in the COVID-19 era, planning for the worst while hoping for the best is the responsible thing to do.

Should Your Firm Handle Your Will? Choosing a Service Provider

According to Knee, it’s critical to have a will in place. For consulting professionals like herself, it’s possible to make a self-proving will, for which there’s no need to produce witnesses later when a person passes away. This option requires a notary, though some states allow for remote notarization; subsequently, mobile notaries are becoming more common.

If your firm has an estate planning or wills and trust group, there is generally no conflict with having internal colleagues prepare estate planning documents. However, bear in mind that your private financial and personal information will be stored under the purview of your employer and accessible to firm personnel. If your estate planning entails business succession for the firm’s partners, it’s advisable to seek neutral counsel.

Partners in firms face the added complexity of navigating arrangements for what happens to their shares when they pass away. Much like your firm maintains a will vault for clients — which entails storing clients’ original documents in a fireproof structure — there should be similar policies in place for data storage for firm succession plans in the instance that partners retire, become disabled or die.

Related: “Book Review: Designing a Succession Plan for Your Law Pratice”

Navigating Changes to the Federal Tax Code

In addition to updating your directives, your estate planning service provider should evaluate the impact of recently proposed tax legislation that could significantly reduce the lifetime gift exclusions and exemptions for estate, generation-skipping and transfer taxes.

“We’re currently in a high-exemption environment,” Knee said. “The exemption for federal estate tax is $11.7 million per person, but they’re talking about cutting that to less than half — going back to $5 million — and some senators are talking about $3.5 million per person.”

The generation-skipping exemption also caps at $11.7 million, but that could be reduced as well. The Biden administration had proposed to eliminate the step-up in basis for inherited assets. Knee mentioned the proposal for a $1 million exemption, where anything above would not get the step-up. There was also talk about immediate recognition of capital gains, even if the asset is not going to be sold. However, neither proposal was contained in the proposed House bill.

Another tax proposal would limit valuation discounts for minority interest holders such as family limited partnerships. While trust term limits were also a focal point of earlier versions of the proposed tax legislation (e.g., a 50-year maximum term for generation-skipping trusts such as dynasty trusts), such a proposal was not contained in the most recent version of the House bill.

Even though many of these tax proposals haven’t moved forward at this time, Knee encourages all lawyers to stay abreast of current federal legislative discussions so they aren’t caught off guard and can provide appropriate counsel to their clients.

Are Your Estate Planning Papers in Order?

Passionate about every adult having a will in place that includes plans for disability and incapacity, Knee says papers can be drawn up in several ways. She encourages everyone, including lawyers who are not experts in this area, to obtain legal counsel sooner rather than later to make use of exemptions and exclusions that may not be available if proposed legislation passes and before a medical emergency should occur.

Illustration ©iStockPhoto.com

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Paul Speca

Paul Speca is SVP, Small Law Markets at LexisNexis in Dayton, Ohio.

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