Sunday, April 25, 1999
It wasn’t long ago that Gerald and Toby Sindler thought estate planning – setting up trusts so heirs are not hard hit by inheritance taxes – was something that only the wealthy needed to worry about.
“And we do not consider ourselves to be wealthy,” said Gerald, who owns Career Objectives, a Mt. Kisco, N.Y., personnel agency, with his wife.
But a brief course in financial planning opened their eyes.
“Even with modest assets, you’ll be surprised how quickly things mount up,” he said, “what with the house and life insurance, in addition to anything that we’ve managed to accumulate over the years.”
Gerald Sindler is now 59 years old. His wife is 56. The Westchester home they bought for $ 65,000 27 years ago, and now own outright, is now worth at least $ 450,000. And that’s just the beginning. So one day about a year ago they made an appointment with the Ettinger Law Firm, which specializes in trusts, estate and elder law.
What they found out shocked them.
“Our estate was in jeopardy not only from the government and the inequitable tax system, but if one or both of us became chronically ill, the absolute cost of long-term care would virtually eat up any finances we have,” Sindler said. In which case they could also forget about any inheritance they might want to pass on to their two grown children.
Today, with a will, revocable trusts that allow the couple to split their assets in equal halves (by law, each is allowed to protect up to $ 650,000 from inheritance tax), and a long-term health-care insurance policy, they are breathing a little easier.
The Sindlers are not alone.
A generation ago, planning your estate and writing a will was easily put off until much later in life. But changes in tax laws – and in the way Americans accumulate money and plan their retirement funds – have estate lawyers and financial advisers saying that everyone, no matter the size of their estate, should work out a financial plan and write a will.
A DREADED TASK
But estate planning is not something most people do easily.
Whether it is the misconception that they do not have enough assets to merit a proper will, or the too- common belief that they are invincible, many people put off dealing with it until “later.” Someone else will handle it, they say to themselves.
The main reason is fear. “This is always a hard conversation to have with clients because most people are not eager to talk about their own mortality,” said Betsy Dillard, an American Express financial adviser based in Manhattan.
“I feel obligated to have that discussion with my clients because wealth preservation is a critical element of financial planning,” she continued. “Think about it, you save and you save and you save throughout your life. Ultimately, it all comes down to who are you saving for.”
David Dorfman, a Manhattan estate lawyer, said one of the main advantages of estate planning is that it can help you stay out of probate court, or avoid costly guardianship hearings if the surviving spouse – or other heirs – should become seriously ill.
“If you don’t have a will, the court will appoint a public administrator to administer the estate and then the family will be paying unnecessary lawyer fees and other fees to strangers,” he said.
Most people want someone they love, or a charity or organization of their own choosing, to inherit that money, no matter how large or small the amount.
AFTER DEATH, TAXES
Another compelling reason to put your finances in order, according to Arden Down, Chase Manhattan Bank’s director of financial planning services, is the ravenous federal tax system, which imperils unprotected estates.
All a person’s assets at the time of death – cars, houses, jewelry, 401(k) and other retirement accounts, life insurance policies, savings and personal investment accounts – are counted as part of the gross estate and may be subject to taxes at a rate of 37% to 55%, regardless of the fact that taxes may have already been paid on many of these items, in one form or another.
“Isn’t that a dirty trick?” Down said. “If I’m aware of what’s going on from the other side of the grave, I’m now pissed off. I can’t take it with me, but I don’t like what’s happening to it either.”
The Taxpayer Relief Act of 1997 gradually increases the size of an estate that is exempt from federal estate taxes. This year’s limit is $ 650,000, and it is supposed to be raised to $ 1 million by the year 2006. The value of the estate above that amount at the time of a person’s death is subject to inheritance tax.
This has nothing to do with me, you say. I don’t have a million dollars to leave to my family, I don’t even have $ 650,000. Think again, says Michael Ettinger, head of the law firm the Sindlers are using. The strong economy is transforming households in the Northeast Corridor, especially those of the so-called baby boomers, and their attitude toward wealth preservation. And the effects of the long-running Wall Street bull market on the New York region, and in particular on real estate values, find even modest wage-earning homeowners with a net worth beyond $ 1 million.
And even those with assets well below the million-dollar mark need to think about their future, said Sandra Busell, a Nassau County estate attorney with clients in Brooklyn and Queens. An estate that consists of a house worth $ 200,000 and another $ 100,000 in various savings accounts needs estate planning too, she said.
A TAX-FREE GIFT
One of the ways to reduce the size of an estate – and any potential tax liability – is for both spouses to give each of their children an annual tax-free gift of up to $ 10,000.
The experts say it is better to act sooner, rather than later. Consult a financial adviser and a lawyer when drafting your estate plan – each has a valuable role to play.
Taking these steps was how Gerald Sindler and his wife discovered their financial house was not in order.
“Not only did we have to worry about some distant future time,” he said, “it brought it into the very real present for us.”
GRAPHIC: timothy cook illustration
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