Supply and Demand of Advanced Estate Tax Planning

By Steven J. Oshins, Esq., AEP (Distinguished)

The federal estate tax exemption was increased to $5 million plus annual inflationary increases earlier this decade.

“The sky is falling!  The sky is falling!  The sky is falling!”  Those were the words of many estate planners who realized that there would be a substantially smaller pool of prospective clients who need advanced estate tax planning.  At that point, not considering state estate taxes, only individuals with estates greater than $5 million and married couples with estates greater than $10 million needed any advanced estate planning done.  Today, in 2017, those figures are now at $5.49 million for individuals and $10.98 million for married couples.

Did that substantial change in the federal estate tax exemption mean the end of advanced estate tax planning?  Many estate planners thought so and changed their practices to focus on basic planning such as revocable living trusts and on ancillary work such as probates, estate administration, business planning, elder law, trusts and estate litigation and other areas of practice.

And many law schools dropped their estate planning courses and their estate and gift tax courses, or they limited them based on their assumption of the demand and utility of these courses.  Students stopped taking these courses and many law firms eliminated or reduced their estate planning departments based on their assumption that estate planning practices will no longer be profitable.  After all, only roughly 0.2% of taxpayers would pay a federal estate tax if they were to die today.

Chicken Little was and still is alive and well!

But Not So Fast! — Enter Supply and Demand

Something crazy happened along the way.  Estate planners stopped learning advanced estate tax planning.  Law schools limited their estate planning curriculum.  Sophisticated estate planning attorneys stopped training their young associates in advanced estate planning under the belief that there wouldn’t be enough business in this area.

In other words, the estate planning community seems to have over-reacted!  The reality is that there seems to be more advanced estate planning work to be done on a per attorney basis than ever before!

There must be less overall advanced estate tax planning work to do.  That is a given since only roughly 0.2% of people would owe a federal estate tax if they died today.  But what seems to have happened is that too many members of the estate planning community stopped spending time learning advanced estate planning (i.e., such as GRATs and installment sales to income tax defective trusts) and law schools stopped teaching it.

And this appears to be a trend.  If the law schools keep reducing their estate planning curriculum and the senior estate planning attorneys stop teaching it to their young associates, as well as reducing their time commitment to stay in tune with the ever-changing case law and tax code, there will soon be far too few attorneys who have the sophistication necessary to service the wealthy.  This may one day become a big problem.

Conclusion

Advanced estate tax planning is alive and well.  The increased estate tax exemption seems to have magnified the amount of advanced estate tax planning business for those who have a heavy concentration in this area.  It seems to have created the opposite result of what many Chicken Littles thought would happen and still think is happening.


ABOUT THE AUTHOR

Steven J. OshSteven-Oshins43721143ins, Esq., AEP (Distinguished) is an attorney at the Law Offices of Oshins & Associates, LLC in Las Vegas, Nevada, with clients throughout the United States. He is listed in The Best Lawyers in America®. He was inducted into the NAEPC Estate Planning Hall of Fame® in 2011 and was named one of the 24 Elite Estate Planning Attorneys in America by the Trust Advisor. He has authored many of the most valuable estate planning and asset protection laws that have been enacted in Nevada. He can be reached at 702-341-6000, ext. 2, at [email protected] or at his firm’s website, www.oshins.com.

Comments

  1. Barry Rabinovich, JD, AEP

    This is also happening in the financial services industry. Life Insurance companies are shedding personnel and reducing their advanced planning teams. Why? Because you can’t sell life insurance to pay estate taxes when there are no estate taxes to pay. As a result, even basic advice that used to be available to financial advisors for free (so they can speak intelligently to a client’s attorney about estate planning) is now more limited to boiler plate concepts that just involve the company’s products. Big Mistake! Lawyers may soon need to figure out how to once again serve the middle market with proper advice. Time to think outside the box about how to deliver custom estate and business planning services.

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