Financial Planning - December 2012

high net worth

self-settled trusts > 51

Massive Wealth
Transfer
Advisors have been racing to finish
what some say is an unprecedented
transfer of wealth.
By Ann Marsh

The year-end scramble is on. Planners and estate lawyers around the coun- try are facing an unprecedented rush of clients seeking to transfer wealth to their descendants because Bush-era tax exemptions may expire at year’s end.

And planners who lack familiarity about estate laws could wind up inadvertently keeping clients from taking advantage of a rapidly closing window that may never reopen, several lawyers say.

“The wealth we see being transferred this year could be 20-fold [that of] any prior year,” says Martin Shenkman, an estate planning attorney in Paramus, N.J., who has begun turning away new clients for the first time in his career.

“In 30 years of doing this, I’ve
never seen this many people of
means trying to plan in such a short
time frame,” he adds. “People ...
are panicking. Never have I seen
the system of estate planners, the
accountants, the lawyers and the
appraisers so backlogged that they
are refusing to take more work on.”
A primary reason for the urgency:
The combined estate and gift tax
exemption, which currently stands
at $5.12 million, is scheduled to drop
to $1 million next year unless law-
makers act. The change is commonly
understood by clients, Shenkman
and others say, and has generated a
flurry of phone calls and activity.

D YNAST Y TRUST CRACKDO WN

That points to another, less well understood issue that’s complicating the end-of-year frenzy: an expected Obama administration clampdown on dynasty trusts.

Currently, high-net-worth investors can place assets into dynasty trusts that, over time, will keep those assets out of the tax system for hundreds of years — or even in perpetuity, depending on the rules of the states in which the trusts are created.

Now, Shenkman says, with the administration and Congress in discussions to resolve the so-called fiscal cliff, the White House is seeking to limit the time frame over which assets may be protected, to just 90 years from the date when a trust is created. If this change becomes law,