Tag: estate planning

San Diego Estate Tax Law

A Look at History:  The Estate Tax Exemption Really Has Increased

In a post earlier this year, we discussed that Americans can now transfer more than $5 million dollars in assets through the estate tax system without incurring a tax, while at the same time permitting their beneficiaries to receive those assets with a new and usually higher “stepped-up” basis.

Addressing the concept gave rise to the question:  Given inflation over the years, is the estate tax exemption really higher than it has been historically?  In order to answer that, we created a table showing the estate tax exemption over time, comparing it to the current buying power of the exemption amount in 2015 dollars.

While the comparisons are not perfect because the tax laws have changed over the years, the chart illustrates that the current exemptions are, indeed, historically high.

Throughout most of the twentieth century, the buying power of the exemption amount hovered at around $500,000 measured in 2015 dollars. The exemption’s 2015 equivalent started creeping up in 1990, but did not reach the $5,000,000 range until 2011. (The basic outline of the gift and estate tax laws has been consistent since the early 1980s.)

As noted in the earlier post, the exemption amount has been historically-high for several years.  There are no signs that it will be reduced in the near future.  It is clearly time to consider free basis when making estate planning decisions.

Tax Year                               Estate Tax Exemption                          2015 Equivalent

1920                                          $50,000                                                     $585,805

1930                                          $100,000                                                  $1,406,000

1940                                          $40,000                                                     $562,000

1950                                          $60,000                                                     $584,000

1960                                          $60,000                                                     $476,000

1970                                          $60,000                                                     $363,000

1980                                          $161,000                                                  $459,000

1990                                          $600,000                                                $1,078,000

2000                                          $675,000                                                  $920,000

2001                                          $675,000                                                  $895,000

2002                                          $1,000,000                                             $1,305,000

2003                                          $1,000,000                                             $1,276,000

2004                                          $1,500,000                                             $1,864,000

2005                                          $1,500,000                                             $1,803,000

2006                                          $2,000,000                                             $2,329,000

2007                                          $2,000,000                                             $2,264,000

2008                                          $2,000,000                                             $2,180,000

2009                                          $3,500,000                                             $3,829,000

2010                                          Unlimited

2011                                          $5,000,000                                             $5,217,000

2012                                          $5,120,000                                             $5,234,000

2013                                          $5,250,000                                             $5,290,000

2014                                          $5,340,000                                             $5,295,000

2015                                          $5,430,000                                             $5,430,000

 

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San Diego Estate Law Firm - King Lear

King Lear’s Tragedy Can Teach Us About Estate Planning

You Won’t Always Be Master of Your Kingdom

When Shakespeare’s King Lear opens, Lear is seated in his castle, resplendent in his power and glory. He is the master of a kingdom.  His will is law.  He wants to retire in peace, with the knowledge that he has implemented a thoughtful estate plan that divides his kingdom among his three devoted and loving daughters.

He has no worries about probate or estate taxes.  He proclaims:

Give me the map there.  Know that we have divided
In three our kingdom; and ‘tis our fast intent
To shake all cares and business from our age,
Conferring them on younger strengths while we
Unburdened crawl toward death.  Our son of Cornwall,
And you our no less loving son of Albany,
We have this hour a constant will to publish
Our daughters’ several dowers, that future strife
May be prevented now.

(, Act I, Sc. 1, Lines 35-43.)

What could be better or wiser?  Lear’s plan should have enhanced his retirement and avoided post-death disputes among his daughters.  The result, however, was betrayal, madness, war and death.

Absolute Power Can Disappear Overnight

Shakespeare’s greatest tragedy reminds us that absolute power can disappear overnight, that human beings can break seemingly-binding agreements, and that the new generation does not always follow the ways of the old.  We are fools on the heath if we believe that an estate plan that ignores the human beings involved will stand the test of time.  Lear’s plan lasted just a few months.

Since it is a tragedy, King Lear magnifies humanity’s many weaknesses.  Even though we know that most families are not like Lear’s family and that many estate plans work well, Shakespeare’s dark vision suggests:

Keep your eyes open.

The daughter who tells you “I love you more than worlds can leave the matter,” may not love you at all.  The daughter who confesses, “Sure, I shall never marry like my sisters, to love my father all,” may be the daughter who really loves you.

Be willing to listen to honest advice.

If someone you have listened to says, “I tell thee thou dost evil,” don’t abruptly exile him from your kingdom.

Above all, be aware of the role of power in human relationships.

Lear divided his kingdom and his crown.  Two of his daughters agreed that they would let him visit their castles periodically with his knights.  However, when his knights started partying in the castles, his daughters broke their agreements and threw Lear out.

He wandered on the heath accompanied by his fool.  He had no power and never regained it.  The members of the younger generation who took his kingdom over exiled him and began implementing their own agendas in the kingdom they had received just months earlier.

Few characters in King Lear portray redeeming human values.  All of life is not King Lear, and many of us have loving and trustworthy familiesHowever, Shakespeare’s undoubted ability to artistically illustrate the truths of human relationships clearly shows that retirement and estate planning are not limited to the technical issues of hoped-for easy living, avoiding disputes and avoiding taxes.

All retirement and estate plans need to be created with a clear vision of the human beings who are intended to be benefitted by them, and the human beings who will be charged with implementing them.

A bad trustee can ruin a good trust.  A good trustee can save a bad trust.

Consider King Lear. 

Can a trust designed to last more than 100 years really be a good idea?  Lear’s attempt to impose his patriarchal design on his daughters failed.  A perpetual trust may be “the ultimate manifestation of patriarchal control . . . .”  (“A Critical Research Agenda For Wills, Trusts, and Estates,” 49 Real Property, Trust and Estate Law Journal, No. 2, Fall 2014.)

King Lear tells us that, in the end, it is not clear that the patriarch has much control.

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