Take the luck out of estate planning

Many people have heard about the federal law passed last December that changed the amount to $5 million that a person can pass to a beneficiary free of federal estate tax. Almost everybody is aware that starting in 2013, there will no longer be an Ohio estate tax (currently there is a tax for estates in excess of $338,333). So with no estate tax problems, most people reading this article no longer have to do any estate planning, right? To truly answer that question, as Dirty Harry once said, you must ask yourself if you feel lucky.

Chances are that:

• You will not die before your children are mature enough to manage their inheritance on their own. Most parents do not want their 18-, 21- or even 25-year-old to suddenly be responsible for a large sum of money without parents around to guide them.

• You will not die or become disabled before you are able to establish a management team to run your business. Creating and running a successful business is difficult to accomplish. Watching the value of that business dwindle because there is nobody to run it when you are unable can be devastating to your family.

• You and/or your partners will not die or become disabled before you are able to sell your business. Can you end up in business with your partner's spouse, children or even ex-spouse? By restricting to whom the partners can transfer their business interest, you can reduce the possibility of ending up in business with somebody outside. Is there a mechanism for you to buy out your partner if he or she wants to leave or to be bought out if you want to retire? It is typically easier to agree on a procedure when the business is going well and none of the partners is currently a buyer or a seller than when the time comes for somebody to go and the partners are clearly on one side or the other.

• You will not be sued for malpractice or for causing an accident. By planning for these unlikely events, assets can be protected against lawsuits. However, once a claim exists, it is too late to start planning.

• None of your children will be sued for malpractice or for causing an accident. By protecting assets before they reach your children, you can provide asset protection for your children that they may not be able to accomplish for themselves.

• All of your children know what you want done with your assets upon your death and that they all get along in times of crisis well enough to effectuate those desires. Are you sure that your children all heard the same thing? Can you count on your children and their spouses to work together, or should you provide some structure to assist them?

• Before 2013 the federal government will pass a law changing the federal estate tax laws. If no new law is passed, the amount you can pass free of federal estate tax will drop to $1 million starting in 2013.

• None of your children will get divorced from a spouse. If the inheritance you leave your children is not treated properly, it may be subject to division in the event your child divorces from a spouse. You can provide protection for your children against their inheritance being divided in a divorce.

• You will avoid the costs and delays of probate upon your death. There are ways to avoid probate without the need for a trust. Do you know what they are? Are you using them now? Will you be able to use them in the future?

You are not that lucky (and I am not so sure the percentages are actually in your favor on those last two items). Estate planning was around before estate taxes were. There are many reasons proper estate planning could make things better for your family. If you ignore your estate planning, it is your family that will be unlucky.

Scott B. Geneva is chair of the estate planning and probate practice group at Meyers, Roman, Friedberg & Lewis in Woodmere.