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

If you are an estate planner, you likely had your best revenue ever in 2012.  Then you likely annihilated your previous revenue record in 2020.  This happened because of the so-called “fear of missing out” with different tax “cliffs” expected to occur at the end of those two years, thereby causing a commotion among the wealthy.

JANUARY 1, 2013 FISCAL CLIFF

Rewind back to the year 2012.  President Obama was in office and the $5 million estate and gift tax exemption was scheduled to expire and roll back to only $1 million at the end of 2012.

It seemed that everyone with a net worth of greater than $5 million was ready, willing and able to pay whatever it cost to find an estate planning attorney to set up an irrevocable trust to receive a $5 million gift.  This level of craziness occurred because of the “fear of missing out”.

Certainly those people with net worths far exceeding the expiring estate and gift tax exemption would be crazy not to take advantage of it before it expires.  But even people with net worths barely above those figures were making these gifts, not even considering the ramifications.

Many estate planning attorneys had to turn away hundreds of potential new clients simply because of employee capacity issues.  You can’t take in more business than you can deliver by the end of the year.  Our office turned away hundreds of potential new clients.

JANUARY 1, 2021 BIDEN CLIFF

Now rewind back to the year 2012.  It appeared that President Trump would win a second term.  But then he lost ground in the polls and suddenly it appeared more and more likely that Joe Biden would defeat him.

But since the Republicans appeared to be winning the Senate in the polls, it appeared that there would be little change in the estate and gift tax rules.  Not so fast!  The polls began to switch and appeared to be very close.

Sometime roughly in the middle of 2020 estate planners could hear the ground shaking as wealthy clients and potential clients started to get worried that they may miss the boat and suddenly it was 2012 all over again, but this time it was even more severe.

The so-called “fear of missing out” was causing the wealthy to hurry their gifting because the $11.58 million estate and gift tax exemption was starting to look vulnerable with the Democrats possibly taking control.  [We know how that turned out.]  And there was talk of the new rules being enacted retroactive to January 1, 2021, thereby adding fuel to the chaos.

Again, estate planners had to say no to hundreds of clients and prospective clients.  I personally sent away at least five hundred potential new clients over the last six months of 2020.

LAW SCHOOLS NOT TEACHING ESTATE AND GIFT TAX

One more factor should be noted.  When the estate and gift tax exemption started to increase exponentially, many law schools stopped teaching estate and gift tax and estate planning classes.  The reason was that this field of law appeared to be on its way to extinction since less people need advanced estate tax planning when the estate tax exemption is so much higher.

This same philosophy was shared by many attorneys and law firms.  Attorneys switched areas of practice and many law firms completely disbanded their estate planning departments.

Enter the law of supply and demand.  This incredible downward shift in the number of skilled estate planning attorneys in advanced estate tax planning, along with such a limited number of younger attorneys entering this field of practice, contributed to an over-weighted shift away from estate planning.

Meanwhile, it is no secret that the net worths of the wealthy have continued to grow exponentially.  With more wealth and substantially less estate planning attorneys skilled in advanced estate tax planning, those who maintained their advanced estate planning practices have prospered like never before.

2022 BIDEN CLIFF

Now here we are in 2021.  Joe Biden is our President and our Congress is made up with 50 Democrats and 50 Republicans with Vice President Kamala Harris, a Democrat, as the tie-breaker.  West Virginia Democratic Senator Joe Manchin appears to be the wild card because he should keep the Democrats from changing the rules too drastically.

There will be a reduction in the estate and gift tax exemption.  Let me repeat that:  There will be a reduction in the estate and gift tax exemption.  The only questions are by how much and by what effective date.

All signs appear to point to this happening some time in 2022.  Therefore, the more this is discussed by the media, the more the people will again be worried about the “fear of missing out”.

Estate planning attorneys, as well as other estate planning advisors, should be more ready this time than they were in 2012 and 2020.  Having been through this fire-drill multiple times, the upcoming cliff should be familiar territory for planners.

Some important tips are as follows:

1. 1. Capacity: Know your firm’s capacity.  Constantly discuss capacity with your fellow employees.  You have to know this so you don’t accept a retainer from a client who expects you to finish the work before the new tax act if you can’t deliver as promised.
   2. Bad Clients: Be very careful not to take on bad or tedious work this year.  This will cause you to have to say no to one or more good clients in a year when you can pick and choose which new clients you take on.
   3. Sophistication: If you don’t have the necessary gift and estate tax planning background, do not take on any clients who want you to help them make their large gifts.  You will have a line of prospective clients, but yet you simply must say no.

SUMMARY

2020 was a spectacular year for estate planners given the fear of a retroactive reduction in the estate and gift tax exemptions.  New clients were calling and emailing like never before.  Expect much of the same as the media increases the awareness of President Biden’s upcoming tax bill.

Congratulations to all estate planners!

RELATED EDUCATION

If you found this article interesting, you might also be interested in these other educational programs and products by Steve Oshins:

• Estate Planning Techniques in a Time of Low Interest Rates
• The Installment Sale to an Intentionally Defective Grantor Trust
• The Grantor Retained Annuity Trust: Significant Estate Tax Savings with Nearly Zero Gift Tax Risk
• Advanced-Level Estate Planning Sales & Marketing Kits
• Steve’s FREE State Rankings Charts

ABOUT THE AUTHOR

Steven J. Oshins, Esq., AEP (Distinguished) is a member of the Law Offices of Oshins & Associates, LLC in Las Vegas, Nevada. He was inducted into the NAEPC Estate Planning Hall of Fame® in 2011. He was named one of the 24 “Elite Estate Planning Attorneys” and the “Top Estate Planning Attorney of 2018” by The Wealth Advisor. Steve was also named one of the Top 100 Attorneys in Worth and is listed in The Best Lawyers in America® which also named him Las Vegas Trusts and Estates Lawyer of the Year in 2012, 2015 and 2018 and Tax Law Lawyer of the Year in 2016 and 2020.  He can be reached at 702-341-6000, ext. 2, at soshins@oshins.com or at his firm’s website, www.oshins.com.