Self Directed Plan Options Supported When Range and Mix is appropriate

In recent years, it has become increasingly common for participants to sue employers or financial matters for failing to offer appropriate investment options to participants.  In the recent case of Renfro v. Unisys Corporation, the Court ruled that there was no breach of fiduciary duty to participants where the mix and range of investment options available to participants are reasonable. An appropriate range of investment options includes varying risk profiles, investment strategies and consideration to fees.


Estate Planning under 2010 Tax Relief Act

Estate Planning Under the Tax Relief Act of 2010

            In the final hours of 2010, Congress passed the Tax Relief Act of 2010.  As part of that act, the estate tax continues for two more years with an exemption level of $5 million and a maximum tax rate of 35%.

            The key issue is that the extension is only for two years.  The possibilities as of January 1, 2013 include (a) possible total repeal; (b) the 2011 and 2012 rules become permanent; (c) we have an ultimate sunset and return to the $1 million exemption level.  Personally, I am making no predictions on this round. 

            Planning in 2011 creates both opportunities and pitfalls.  Key planning opportunities are as follows:

            $5 million exemption for estate and gift taxes.  For 2011 and 2012, we return to a unified credit for estate and gift taxes. Any donor (or later decedent) can transfer up to $5,000,000 to his or her heirs gift and estate tax free.    

            For those individuals with assets well in excess of $5,000,000, the law presents an opportunity to consider aggressive lifetime gifts. The caveat of many advisors is a concern as to what will happen if there is a return to the $1 million dollar level.  For those with an estate in the vicinity of the exemption amount, consideration must be given to whether there will be more benefit from a step-up in basis, which results with an at death transfer, than there will be from a lifetime gift.

            With respect to any estate plan, the higher exemption amount creates the opportunity to focus more on desired disposition of assets rather than avoiding estate taxes.  Income tax planning becomes a more significant factor than estate tax planning.

            Portability of exemption.  The law allows the executor of a deceased spouse’s estate to transfer any unused exemption to the surviving spouse. That is, if the first spouse to die has an estate of $2 million dollars, such spouse’s unused exemption will be $3 million dollars. That exemption can be passed to the surviving spouse, who then has an $8 million dollar exemption.

            While some commentators view the portability of the exemption as a panacea and eliminating the need for trusts, my view is that the portability simply offers added flexibility but has limited usefulness in estate plans of those who have been married more than once and/or have children from various marriages.  Even in the cases of first marriages, the available unused exemption is limited to the unused exemption of the most recent deceased spouse.  Thus, if the surviving spouse remarries and is predeceased by her new spouse, the available transferred unused exemption will be that of the later spouse.

            My recommendation.   For the next two years, I am not recommending dramatic changes to estate plans. I do recommend review. Most should review current disposition structure and consider whether there are any short term planning opportunities under the law as it exists for two years.

Power Point-Skills for The Estate Planning Process

To view our Power Point Presentation on Skills for the Estate Planning Process, please follow the attached link:


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