From the July 2007 issue of Investment Advisor • Subscribe!

July 1, 2007

Getting Your Affairs in Order

Death. No one likes to confront it, but Wynne Whitman is in the business of serving clients who must face it, and is now trying to educate the general public that they, too, will benefit from estate and other financial planning for their eventual deaths--and the death of family members.

Whitman, a 42-year-old tax lawyer and partner in the estates department at the 80-person firm of Schenck, Price, Smith and King in Morristown, New Jersey, recently co-wrote with an oncologist Wants, Wishes and Wills, an easy-to-read consumer's guide to protecting assets for heirs and others both while still healthy and also when facing death.

Unfortunately, many people wait until the end, and time that should be spent visiting and saying goodbye is instead consumed with family members scurrying around to find financial documents and getting affairs in order, Whitman says. "I spend a lot of time going to hospitals and critical care units because people have waited" too long, she says.

Whitman, who has been an attorney for 13 years, also tries to draw out any potential problems when she talks with families. For instance, occasionally she will ask certain family members to write a letter to her, as they will be more forthcoming about a gambling or drug problems among a family member or any infighting among siblings. Then she will be asked to structure the proceeds accordingly by, for instance, setting up a trust that can't be tapped into until such behavior changes.

A key to helping people face their own demise is talking about tax issues, she says. If they do nothing, the tax payout could be a lot heftier than if trusts are created, for example. She can help structure the proceeds of life insurance so the proceeds are not included in the estate, for example. She points out that "70% of families lose their money in three generations," and the worst thing the head of a family can do to repeat loss in further generations is to do nothing. Also, if a client fails to create an estate plan, the money can go to the people you least expect it to, depending on what state you live in, she says. For instance, in Kentucky, the spouse is fifth in line for inheritance if the estate is left without a will.

Estate planning is especially important with the ever-changing federal estate tax exclusion, now $2 million, which will rise to $3.5 million in 2009, and will disappear for one year, 2010, after which time it goes down to $1 million. The maximum tax rate on assets over the exclusion amount is 45%. Thus, estate planning to mitigate the tax burden would behoove those whose assets, liquid or not, come close to $2 million. (Below the exclusion amount, the estate is taxed at the state level.)

Whitman concedes that while she's unsure what is going to happen with the potential repeal or reduction of the estate tax, she believes that given the focus on the upcoming Presidential election in 2008, efforts to change the estate tax law might not be a Congressional priority now. Some people feel the exclusion will settle at $3 million to $5 million, she says, with the chance of repeal more remote.

"A lot of industries will fight for decreasing the estate tax," she says. Small businesses and consumers who are real-estate rich but cash poor are especially hurt by the estate tax, she notes, because they end up having to sell property just to pay the tax. She advocates setting up trusts through tax planners such as herself.

One of the more compelling problems Whitman has successfully tackled is working with post-9/11 victims' families to ensure that really young children weren't receiving very large sums of money at a young age--even 18 is too young, she argues. She made sure that inheritance funds and victims' compensation funds are held in trusts through lobbying New Jersey state legislators to change the law. It even was applied retroactively for 9-11 victims, she says. "Only about 10% of 9-11 victim families had wills. They [the ones who died] were really young," she says of the victims.

Whitman also works closely with financial advisors and gives them advice on finding a good estate planner. She first tells advisors that knowledge is key--the person should be a specialist and an expert in estate planning. Second, look for independence. "Make sure there aren't any conflicts of interest. You want the planner working for you, not any institution or entity," she says. Third, check availability. "If you can't get an appointment for months, he or she may not be attentive to your needs." Finally, she counsels, find a good listener.


Elizabeth D. Festa is a freelance business writer based in Washington, D.C. She can be reached by e-mail at elizabeth.d.festa@comcast.net.

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