Smart Money

By Kay Kipling September 1, 2009

Giving now

Ronald D. Aucutt was named one of four top Washington lawyers in the field of trusts and estates in 2004 by the Washington Business Journal; he was also one of Legal Times’ 12 leading estate planning lawyers in 2004. A partner in the McGuireWoods law firm and leader of its private wealth services group, he will speak on Sept. 8 in the Community Foundation of Sarasota County’s Distinguished Speakers Series (complimentary for professional advisers; call Jill Peters at 556-7174 for more information). We spoke with him recently about trends in estate planning and charitable giving trends and regulations.

Q. Every case is different, but as a wealth transfer specialist, are there any general points worth making? We’re in a fairly unique time, where values are down, so it’s a good time to make transfers to beneficiaries and children. I’m seeing a significant opportunity in that way for business owners as well, as fair market value is down.

Q. What about charitable donors? With interest rates very low, there are certain techniques that are very attractive as we combine estate planning and moving wealth. One tool is the charitable lead annuity trust. In my experience, that’s usually integrated into estate planning for a client, along with the selection of trustees and beneficiaries. It benefits the charity now; the family gets the money later [with little or no taxes to pay]. [The Community Foundation of Sarasota has a number of these trusts, some in place and helping specific causes for years.]

Q. What’s happening with the estate tax exemption? As it stands now, in 2010, there is no estate tax at all. In 2011, the estate tax comes back with an exemption of $1 million, in contrast to $2 million or $3.5 million. No one can tell for sure what Congress is going to do, but I believe they will find a way to prevent repeal [of the exemption] from taking place for 2010. Will it just be a one-year fix, or more permanent? I’d say chances are about 50-50 for its being permanent, but close to zero that Congress will not act at all and we would see the repeal take effect.

Q. What about family limited partnerships? Are they a good choice in planning? The IRS often sees them as being in place for a very short time, just until the estate is closed, and believes they’re for tax purposes only and therefore not fair. I think while we’ve all seen court cases about them, the facts in those cases have been very extreme, so the law regarding them has not developed in a consistent way. We [estate planners and attorneys] would welcome rules that are measured, reasonable, balanced and clear.

Q. Any new incentives for charitable giving? I don’t see any incentives of a structural nature in sight. Congress will probably revisit the question of rollovers of IRAs to charities, which has been important to some in the past. What I see most likely affecting charitable giving is the possibility of higher income tax rates. That will tend to increase the share of charitable contributions that is borne by the IRS, and will make most forms of giving more attractive.

That said, in my own experience, tax rates only affect the way money is given. The people who want to make large charitable gifts begin with the impulse to give and then find ways to do it. Tax law never motivates the gift.

Q. Any other predictions? I think we need to wait and see what the year brings in terms of economic turnaround and politics. Congress continues to be very partisan, and we don’t get the best lawmaking in that environment. The Obama administration is trying some things, and we don’t know yet how they’ll work. But it should be clear by the end of the year and into spring. Right now, there are a lot of question marks.

Filed under
Show Comments