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December 29, 2002 at 07:00 PM
Estate Planning Is Undergoing A Radical Reformation
By John J. Scroggin
Estate planning is in the midst of a radical reformation and a number of factors are driving the process.
First, there has been an explosion of wealth in the United States. Up to $136 trillion may be inherited in the next 50 years.
According to a number of studies, only 10% of todays millionaires inherited their wealth. These largely self-made millionaires who live next door often believe that being self-sufficient (as opposed to relying upon a family inheritance) is critical to the development of an heirs character. And while they may not be frivolous enough to spend their childrens inheritance, they are increasingly restricting the manner in which heirs will receive an inheritance.
Second, the number of taxpayers subject to a federal transfer tax is decreasing (although the imposition of state inheritance taxes may actually increase in coming years). The result of the recent Congressional elections increases the chance that the high exemptions will remain for the foreseeable future.
With fewer taxpayers subject to a confiscation of assets at death, personal perspectives, rather than tax avoidance, are driving the decision process. Planners are well advised to acknowledge this shifting paradigm and use it in their marketing strategies.
Third, between 1995 and the year 2050, the elderly population will nearly double to 80 million people. Most of the growth will occur between the year 2010 and 2030. The increasing life expectancy of Americans means that there is an increasing need for tools that assure protection of the elderly from abuse, provide for management of assets, and designate parties to make property and medical decisions.
Well-drafted living trusts, living wills, medical powers of attorney and durable general powers of attorney are an important element of todays estate plan. As a valued-added tool, see the Medical Directive at .
The aging of the boomers and advances in medical science, may work to bring about an interesting collision: people who have not sufficiently saved for retirement and who live longer than they expected. This could result in more demand for government spending and, without increased funding, an effective per capita reduction in social programs for the elderly. Fifty percent of people over age 85 need daily assistance. Someone will have to cover this increasing cost.
The tax benefits for long-term care insurance and payment of long-term care costs are going to continue to increase. This development is being promoted by the political clout of the elderly and the continuing need to replace reduced governmental benefits.
