Estate Planning. Estate Planning After ATRA: A Summary of the Heckerling Institute on. Estate Planning

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1 Estate Planning Estate Planning After ATRA: A Summary of the Heckerling Institute on Estate Planning March 2013 At Hawthorn, we believe the tax efficient growth of capital can best be achieved through an integrated portfolio constructed through a valuation-based, risk-aware, diversified investment approach. Operation Twist, originally created in the early 1960s during the Kennedy administration, is a monetary policy tool used by the Fed to sell or reduce its short?term Treasury holdings in favor of buying longer?term Treasuries. The goal is t o reduce longer?term interest rates to Martyn S. Babitz, J.D. Senior Vice President National Director of Estate Planning martyn.babitz@hawthorn.pnc.com The American Taxpayer Relief Act of 2012 (ATRA), 1 the compromise engineered in Washington on January 1, 2013, to help alleviate the fiscal cliff, has created a new environment for estate planning. The changes wrought by ATRA were at the forefront of the 47th Annual Heckerling Institute on Estate Planning, a week-long conference for estate planning advisors. 2 Martyn Babitz, PNC s National Director of Estate Planning and author of this report, attended the conference, which featured lectures and breakout sessions on the latest estate planning techniques and strategies. In this report, he summarizes his thoughts and what he gleaned from the speakers remarks on several estate planning topics. We hope you find this report helpful as you discuss your estate planning needs with your tax, legal, and accounting advisors. Key Drivers After ATRA The Heckerling Institute speakers stressed four central points about ATRA: Sense of Permanence in Federal Transfer Tax For the first time in 12 years, there appears to be some sense of permanence in the federal transfer tax (estate tax, gift tax, and generation skipping transfer tax) laws. Prior to ATRA, there had been a phased-in repeal of these taxes (including increased exemptions and decreased rates), a sunset of the repeal, followed by a temporary two-year reinstatement of the taxes at exemption levels of $5 million (indexed for inflation) and a 35% top rate. The exemption was to automatically decline to $1 million ($1.4 million for the generation skipping transfer tax), and the top rate was set to increase to 55% (60% in some situations) after Instead, under ATRA, until and unless Congress acts, a permanent $5 million exemption indexed for inflation is in place. The exemption is $5.25 million for Portability, that is, the ability of a surviving spouse to utilize the unused portion of a deceased spouse s gift tax and estate tax exemption (but not the generation skipping tax exemption), has been made permanent as well. 1 American Taxpayer Relief Act of 2012 (P.L ). 2 The 47th Annual Heckerling Institute on Estate Planning was held on January 14-18, 2013, in Miami, Florida. Detailed information on sessions and speakers can be found at hawthorn.pnc.com

2 Role of Income Tax Planning Income tax planning will likely become more important in estate planning. This is due in large part to the higher statutory top income tax rate of 39.6% and 20% long-term capital gain rate for individuals with incomes over $400,000 ($450,000 for joint filers). These rates also apply to trusts with incomes that exceed $11,950 annually. Further, a 3.8% Medicare tax now applies to most investment income if an individual s income exceeds $200,000 ($250,000 for married individuals filing jointly). Thus, even for affluent individuals and families subject to the highest transfer tax and income tax rates, gifting appreciated assets to reduce the taxable estate may not always be advisable because of the loss in stepped-up basis otherwise available for assets owned at death (and corresponding elimination of capital gains tax on the appreciation of the assets during the lifetime of the owner). This is not a new result, but the increase in the effective capital gains rate and the potential Medicare surtax under ATRA mean that the result could be worse than before. Consider one of many possible hypothetical examples (Table 1). An individual with a large taxable estate who has exhausted his lifetime gift tax exemption considers gifting a $1 million asset with a zero basis to his son, who is subject to the top income tax bracket. The donor dies less than three years later and the asset appreciates no further. The gift will cause the son to pay approximately $143,000 of additional income and Medicare taxes that would have been avoided had the property come to the son through his father's estate. This example does not include the potential impact of state and local income, capital gains, and death taxes. Nor does it include the Pease limitation (reducing deductions for charitable contributions, state and local taxes, mortgage interest, and miscellaneous itemized deductions by 3% of adjusted gross income over $300,000 for joint return filers and $250,000 for individuals, up to a maximum reduction of 80% of these deductions) and Personal Exemption Phase-out (PEP) limitation (phasing out the benefit of the personal exemption from $300,000 to Table 1 Illustration of Potential Income and Medicare Tax Effect of Lifetime Gifts of Appreciated Property Means of Transfer to Child Lifetime Gift Inheritance Transfer Taxes Value of Property $1,000,000 $1,000,000 Cost Basis zero zero Transfer Tax Payable (40%) $400,000 $400,000 Transferee's additional basis 400,000 1,000,000 Income and Medicare Taxes Proceeds of Sale $1,000,000 $1,000,000 Child's Basis (400,000) (1,000,000) Gain Realized $600,000 zero Capital Gain Tax (20%) $120,000 zero Medicare Surtax ( 3.8%) 22,800 zero Total Income and Medicare Tax $142,800 zero Total Transfer, Income & Medicare Taxes $542,800 $400,000 Tax Detriment of Lifetime Transfer $142,800 Calculations do not include application of the Pease or PEP limitations. State Level Capital Gain or Death Taxes May Apply Source: PNC 2

3 $422,000 of adjusted gross income for joint return filers and $250,000 to $372,500 for single taxpayers). Portability as a Planning Consideration Portability will likely be an important planning consideration going forward. The applicable exclusion amount against the federal gift and estate tax now equals the sum of two numbers: the donor's basic exclusion amount ($5 million, indexed for inflation) plus a deceased spousal unused exclusion (DSUE) amount. The DSUE amount is also available for lifetime gifts. Such gifts will reduce the DSUE amount first rather than the surviving spouse's basic exemption amount. Further, to elect portability, one must file a timely Estate Tax return. The DSUE amount is calculated based on the amount of the exemption in the year the first spouse died (thus, if the exemption goes up or down, the DSUE amount does not). Despite the availability of portability, affirmatively utilizing the exemption of the first spouse to die via so-called credit shelter trusts is still advisable in most cases for a number of reasons, including: n creditor protection; n spendthrift protection; n professional management of the assets via an appropriate corporate or other Trustee, excluding appreciation of the assets from the survivor s taxable estate; and n utilization of the generation skipping transfer tax (GST) exemption, which is not possible with portability. Timing of Significant Gifts It is important to deal with the significant gifts made in 2011 or 2012 in anticipation of reduced transfer tax exemptions (which did not happen) and look ahead to potential additional tax law or regulatory changes that may adversely affect estate planning. Those individuals who made gifts in 2012 should file federal gift tax returns to start the three-year statute of limitations. Accordingly, transferors should file timely returns rather than filing on extension. With more than double the typical amount of gift tax returns expected to be filed for 2012 (about 500,000) and approximately only 350 Internal Revenue Service (IRS) examiners to review them, early filing could prove beneficial. Further, with fewer estate tax returns being filed in light of the substantially higher exemption, IRS resources may be shifted to the review of creative gifting strategies, such as those involving valuation discounts or other techniques to leverage the gift tax exemption. In light of the present and continuing debt crisis, Congress and President Obama are likely to consider revenue enhancements that could adversely affect future estate planning, including: n eliminating valuation discounts for gifts of restricted interests, such as Limited Liability Company (LLC) or Family Limited Partnership (FLP) interests; n requiring a minimum term (such as the ten years proposed by the Obama administration) for Grantor Retained Annuity Trusts (GRATs); 3

4 n shortening the period covered by the GST exemption to 90 years; and n including the value of all prospective grantor trusts (that is, trusts that are taxable to the grantor for income tax purposes) in the grantor s taxable estate. This would include those that would otherwise be defective under current law (that is, structured to be excludible from the grantor s taxable estate for tax purposes under current Tax Code provisions). On the other hand, most Heckerling Institute presenters believed that the new exemption levels, with annual inflation adjustment and the new 40% transfer tax rate, were likely to remain in effect for at least the next few years. Presenters noted that the projected tax savings for each of these proposals are relatively modest and that each one lacks broad support. For example, one presenter observed that limiting the GST exemption to 90 years would yield no new revenue for 90 years (unless it created a disincentive to using the GST exemption). Nevertheless, pressure for tax reform may result in one or more of these proposals passing in one form or another. Accordingly, individuals considering additional wealth transfer strategies that could be affected by the above-described potential changes should act soon in advance of possible action on Capitol Hill later this year. In addition, transferors and their advisors should review the implementation of gifts made in 2012 to confirm that all necessary details were executed. Also at this time, transferors and their advisors should address any additional steps, such as swapping other assets for those that may have been initially gifted into trusts. Clients and their advisors may want to review what prospective modifications of their estate plans are advisable in light of the post-atra transfer tax exemption levels and rates. Prospects for Tax Reform There have been significant discussions among advisors that the Tax Code is too complicated and lacks stability and certainty. Correspondingly, the federal government s fiscal situation remains a cause for concern, with high deficits and a rising debt burden becoming the norm. Lindy Paull, former Chief of Staff of the Joint Committee on Taxation of the U.S. Congress, spoke of the possibility of simplifying and stabilizing the federal tax system. Her key points were: n ATRA did not alter the continuing fundamental need for tax reform. The Tax Code remains unpredictable and unstable; for example, there are still a number of tax provisions expiring at the end of n The Tax Code is still overly complex and is becoming more, not less, complex. Complexity is the number one challenge faced by U.S. taxpayers. n Fairness and equity need to be improved in the current Tax Code. n The Code needs to enhance potential economic growth as well as the United States s competitive advantage in the global economy, particularly with 95% of the world s consumers residing outside of the United States. 4

5 n The need for additional tax revenues to address substantial budget deficits is significant. Projections have deficits doubling and becoming as much as 7% of GDP. Paull suggested that the president s budget to be released this quarter will be the starting point in the coming debate on the Tax Code. Estate Planning in 2013 After the Biggest Planning and Wealth Transfer Year Ever Many 2012 gifts were made to defective grantor trusts that often included, perhaps among other provisions, the power of the grantor to substitute assets of equal value. Such a provision provides flexibility and the opportunity to swap complex assets or those that are difficult to value (and thus could not be readily transferred by year end), now that time is not of the essence. The presenters recommended strict adherence to formalities in executing swaps, such as what would normally occur between third parties at arm s length. Transfers to such trusts potentially provide relief to those with donor's remorse to exchange assets, for example, nonincome-producing assets for investment assets originally gifted in A donor might even consider purchasing assets back in exchange for a promissory note based on the low current intra-family loan interest rates. In addressing the notion of completely nullifying and returning gifts made in 2012, presenters noted that actual rescission of gifts would require satisfying applicable state law requirements, which generally require demonstrating that a mistake of law or mistake of fact occurred. Whether being wrong in predicting that the lifetime gift tax exemption would be reduced in 2013 constitutes either a mistake of law or fact seems unlikely. Further, several states require that a valid rescission must occur in the same year, which would eliminate the possibility of rescinding 2012 gifts made by transferors in such states. Advisors might want to consider a formula clause for assets without a readily ascertainable fair market value or for which valuation discounts have been taken (such as FLP or LLC interests). Such clauses provide for adjustment of the amount of assets transferred or for transfer of value in excess of the intended gift amount to be transferred to an exempt transferee such as charity, in the event of IRS valuation challenges, to avoid gift tax liability. Such clauses are discussed further below in light of the recent Estate of Wandry v. Commissioner case approving of one type of formula clause. Many opportunities may have been created by 2012 gifting. Transferors might consider leveraging gifts to trusts in 2012 by perhaps selling additional assets to such trusts in exchange for a promissory note issued by the trustee, using the gifted assets as collateral. For those individuals who have GRATs that will terminate in 2013 or later, allocating some of the transferor s increased GST exemption to the remainder interest could be considered. This exemption could potentially remain in trust for future generations on an estate tax-exempt basis. The presenters also covered gift-splitting elections available for 2012 gifts made to trusts wherein a spouse has a beneficial interest, often referred to as a Spousal 5

6 Lifetime Access Trust (SLAT). A gift-splitting election would treat the transfer as if it were made one-half by each spouse, thus utilizing each spouse s lifetime gift tax exemption to that extent. The presenters noted that a gift-splitting election in such a case would be possible only if the spouse s beneficial interest is ascertainable and deducted from the portion of the transfer for which the split election is made. Family Limited Partnerships and Limited Liability Companies Several presentations discussed the use of FLPs and LLCs in estate planning, including the use of formula gifts to manage the valuation risks inherent in transfers of such interests. Gifting LLC Interests The case of Estate of Wandry v. Commissioner 3 was discussed at length. In that case, the U.S. Tax Court upheld a formula clause approach to gifting LLC interests. Previous cases involved formula allocation clauses (wherein any excess value of a gifted interest beyond a certain amount, such as the transferor s available gift tax exemption, would be allocated to a gift tax-exempt entity such as charity). On the other hand, Wandry involved a formula transfer clause as summarized below. In Wandry, the transferors stated, in the transfer document, that they were gifting a specific dollar amount (essentially equal to their available lifetime gift tax exemption and annual gift tax exclusions) to family members and, based on an independent professional appraisal, would gift LLC units corresponding to that amount. Further, the transfer document stated that should the appraisal be challenged by the IRS and the ultimate value of each unit increased as a result, then the number of LLC units gifted would be adjusted accordingly such that the actual gifted amount would not change. This formula transfer approach is distinguished from the formula allocation approach ruled on by the Tax Court and appellate courts previously, as noted above. The gift tax return reported a specific number of LLC units gifted corresponding to the appraised value to arrive at the intended gift amount. After the IRS challenged the valuation of the LLC units and an increased value was agreed upon, the IRS assessed a gift tax on the excess value. The taxpayers litigated the matter, asserting that the formula clause would result in the donees receiving a lesser amount of units to arrive at the intended dollar amount for the gifts. The Tax Court held for the taxpayers. The IRS issued a notice of nonacquiescence as to the Tax Court s ruling. 4 The formula transfer clause in Wandry differs from a formula allocation clause in that the transferor s financial position is contingent on the prospective outcome of an IRS valuation challenge, which may affect the total fractional portion, or units, of an asset ultimately transferred. On the other hand, a formula allocation clause involves transfer of a definitive number of units, or fraction, of an asset by the transferor; only the recipients of that asset and allocation among them may be altered by an IRS valuation challenge. With a formula allocation clause, the excess gift resulting from an unfavorable IRS valuation challenge need not pass directly to charity in order to avoid gift 3 Estate of Wandry v. Commissioner, T.C. Memorandum (March 26, 2012). 4 Internal Revenue Bulletin (November 13, 2012). 6

7 tax on that amount. Other potential recipients could include spouses or marital trusts, zeroed-out GRATs, or zeroed-out Charitable Lead Annuity Trusts (CLATs). Despite the uncertainty of whether the IRS will challenge formula valuation clauses (and specifically formula transfer clauses similar to that utilized in Wandry) going forward in light of its nonacquiescence in Wandry, several of the Heckerling Institute presenters suggested that the precedent established by the Tax Court was well-reasoned. They also suggested that formula transfer clauses allow for targeted gifts of difficult-to-value assets (such as FLP or LLC interests for which valuation discounts have been taken and which may contain assets without a readily defined value) without exposure to additional gift tax liability should the valuation be modified in disputed valuation proceedings with the IRS. There were notable dissenters among the presenters who were quite uncertain that the holding in Wandry should be relied upon, and that the formula allocation clause approach is safer at this time. To make the formula transfer approach safer, an alternative suggestion is that the primary donee execute a formula disclaimer of any amount ultimately exceeding the targeted gift amount following an IRS valuation challenge. This approach may be preferable in appropriate situations because formula disclaimers have been recognized by Treasury regulations as valid. Particularly with the inflation-adjusted additional gift tax exemption that will be permitted annually under ATRA, such formula clauses may be extremely beneficial in allowing for gifts of such interests to utilize such additional gift tax exemptions with hard-to-value assets without undue concern over the risk of out-of-pocket gift tax liability should the valuation be subsequently modified after IRS examination of the gift tax return. The presenters urged, however, that such defined formula value clause gifts should be fully and accurately disclosed on a federal gift tax return to ensure that the three-year statute of limitations will start. In addition, the presenters suggested that a grantor trust be used as the primary recipient of formula transfer gifts such that, should the formula approach be invalidated, no corrective income tax returns would be required to account for the income and losses incorrectly allocated to the trust rather than the grantor during the adjudication period because all tax items of the trust would be reportable on the grantor s income tax return in any event. Qualifying Gifts of FLP or LLC Interests The presenters also discussed qualifying gifts of FLP or LLC interests for the gift tax annual exclusion (which increased to $14,000 per donee in 2013), which requires the gift of a so-called present interest. In Estate of Wimmer v. Commissioner, 5 the tax court held that to qualify as a present interest gift, FLP interests must satisfy a three-part test: income is generated by the partnership, some of the income flows through to the partners, and the portion flowing through is readily ascertainable. Although the FLP interests satisfied all three parts of the test in Wimmer, many family entities may not satisfy these requirements. Fortunately, in light of ATRA, satisfying the present interest requirement for the gift tax annual exclusion will likely not be as critical in light of the 5 Estate of Wimmer v. Commissioner, TC Memorandum

8 inflation-adjusted additional lifetime gift tax exemption that will be available annually. Gifts utilizing the lifetime gift tax exemption need not satisfy a present interest test. Retaining control over the assets transferred via FLPs or LLCs was also discussed at length in one of the sessions. Generally, retaining investment control over the assets is not problematic and will not typically cause inclusion of the gifted interests in the transferor s taxable estate under Section 2036 of the Internal Revenue Code. A transferor s retention of control over distributions from an LLC or FLP, however, can be more problematic. Three safe harbors were suggested for maintaining some control over distributions without causing inclusion of the transferred interests in the transferor s taxable estate: n Subjecting the retained distribution power to an ascertainable standard that can be objectively applied (Revenue Ruling ) 6 ; n Gifting LLC or FLP interests to a trust, with the transferor retaining the power to remove and replace the Trustee, as long as the replacement Trustee is not related to or subordinate to the transferor (Revenue Ruling 95-58) 7 ; and n Contributing the general partnership interest in an FLP to a corporation with the transferor retaining the voting stock in the corporation and gifting the nonvoting stock to family members (Revenue Ruling 81-15). 8 The concept of leveraging the use of FLPs and LLCs by selling additional units, beyond the available lifetime gift tax exemption, at discounted values based on lack of marketability and control to a trust that is a grantor trust for income tax purposes but outside of the grantor s taxable estate for estate tax purposes, in exchange for a promissory note, was also covered. The current low interest rates that can be used for the promissory note, the lack of income tax or capital gain recognition on the sale, and the use of assets gifted to the trust (such as units of the FLP or LLC) to collateralize the note (most advisors feel that such collateral should equal at least 10% of the value of the note) are distinct advantages. A further advantage of sales of FLP or LLC interests to a family trust includes the ability to structure, or restructure, the promissory note as an annuity to increase payments to the transferor, or to reduce or eliminate the note s balance that will be included in the transferor s taxable estate. To mitigate the problem of inclusion of the promissory note s remaining balance in the transferor s taxable estate, the transferor could bequeath the note to his or her surviving spouse (deferring the estate tax under the marital deduction) and the spouse could continue to receive the remaining payments on the note. The presenters suggested that formula valuation clauses (such as pursuant to Wandry, discussed above) be used for gifts or sales of FLP and LLC interests, with subsequent valuation increases following IRS challenge passing via the corresponding FLP or LLC units to such gift tax exempt transferees as charity, 6 Revenue Ruling , C.B. 407 (1973). 7 Revenue Ruling 95-58, C.B. 191 (1995). 8 Revenue Ruling 81-15, C.B. 457 (1981). 8

9 a spouse or marital trust, or a zeroed-out GRAT to avoid gift tax liability and reduce or eliminate IRS incentive to challenge the reported valuation for gift tax purposes. Tax Court Rulings Affecting FLPs and LLCs The presentations also covered some generally favorable Tax Court rulings in 2012 affecting FLPs and LLCs. In Stone v. Commissioner, 9 the Tax Court held that a requisite nontax purpose for forming the FLP in that case could be found in the motive to develop and sell the undeveloped woodlands contributed to form the partnership. The Tax Court did confirm that some nontax motive for forming an FLP is necessary. Further, because no valuation discounts were taken with respect to the transferred limited partnership interests, the precedential value of Stone is questionable. In Kelly v. Commissioner, 10 the Tax Court held that FLPs formed by a guardian pursuant to a court order to protect the transferred assets from liability exposure was a valid nontax purpose. The presenters noted several key factors in passing IRS muster with respect to an FLP or LLC: n Respect the entity form; n Be prepared to substantiate a nontax business purpose for the entity; n Properly document transfers of interests in the entity; n Maintain accurate capital accounts; n Maintain books and records for the entity; and n All distributions must follow the terms of the governing documents. Business Succession Planning One of the presentations focused on family business succession planning. The presenter suggested that family business issues generally are 10% planning and 90% money. Further, the estate tax concerns are typically not the major issue in succession planning, and planning is critical even where there is not significant estate tax exposure. The presenter focused on difficult sibling issues, including rivalries among those active in the business, and how to fairly treat nonactive siblings (including creation of assets such as life insurance to equalize bequests and whether the active children s sweat equity should be taken into account). It was suggested that, in some cases, sibling rivalries among active children could possibly be resolved by splitting the business into separate entities for each child through a tax-free division under Section 355 of the Internal Revenue Code. The focus is on the need to plan for succession when the business is formed, since it is impossible to know when the owner may become incompetent or die. Issues include the who and how of succession, retaining key employees, liquidity for the owner in retirement and for taxes at death, cash flows as the owner transitions out of the business, and mitigation of transfer tax. 9 Stone v. Commissioner, TC Memorandum (2012). 10 Kelly v. Commissioner, TC Memorandum (2012). 9

10 The presenter cautioned against giving equity to a nonfamily member employee. Rather, he suggested phantom equity to avoid nonfamily members having legal rights with respect to the business. Exit strategies discussed included use of Employee Stock Ownership Plans, which can borrow and thereby empower employee participants to purchase a business where obtaining financing directly might be otherwise difficult. It is also possible to use a grantor trust for income tax purposes to sell interests to family members who are beneficiaries of such a trust. The trust could be GST exempt to maintain the business in a transfer tax-free container for many generations. The presenter suggested valuation discounts at levels of 50% for lack of control and marketability as to operating businesses. Further, having the trust obtain life insurance to purchase the owner s interests at death to benefit from a stepped-up basis in the business interests was also suggested. Family Loans With the low interest rates currently available for intra-family loans, utilizing such loans as a wealth transfer technique has become popular, either to finance techniques such as sales of assets to family trusts or for straight loans to family members or family trusts which invest for a return exceeding the low hurdle rate. A few considerations regarding family loans were noted: n A popular approach is to renegotiate a family loan when the AFR declines. The presenters suggested that, although this approach is generally acceptable, frequent renegotiations over a short period of time may raise concerns. In addition, it may be appropriate to consider some form of consideration in exchange for a renegotiated lower rate in such circumstances, such as a one-time fee or different terms of payment on the new note. n It may be advisable to utilize term notes rather than demand notes for intra-family loans in order to lock in the current ultra-low rates; demand notes involve a floating rate that changes semiannually. n Discounting the remaining value of a family promissory note held by the lender at death for estate tax purposes may be possible based on the low interest rate relative to market rates or insufficiency of collateral relative to a typical third-party lender requirement, or both. Conclusion As a result of ATRA and the significant wealth transfer occurring last year in anticipation of the less favorable default environment that ATRA avoided, it seems that the focus of estate planning has shifted precipitously going forward. Speakers at the conference offered five conclusions about the state of estate planning: n The certainty of permanent transfer tax rules allows for more confidence on the part of individuals, families, and their advisors in long-term planning decisions. 10

11 n Some individuals and married couples may feel that their net worth and anticipated growth could possibly fall within the parameters of the new estate tax exemption as indexed for inflation. Thus, they may shift their focus from wealth transfer considerations to utilization of portability and appropriate terms for the transfer and enjoyment of wealth by succeeding generations, liberated from transfer tax concerns. n The preserved unification of the federal estate tax, gift tax, and GST tax exemptions, along with an annual inflation increase, means that affluent individuals and their advisors should focus on executing wealth transfer strategies on an ongoing basis. In some cases, the structures (for example, trusts, FLPs) established in the wealth transfers of 2012 could be utilized going forward with respect to the annual increased transfer tax exemption amounts. Further, for now, leveraged techniques for wealth transfer remain significant for affluent and ultra-affluent individuals and their families. n The ongoing debt crisis may pressure Congress to create restrictions on favorable wealth transfer techniques such as GRATs and valuation discounts through FLPs and LLCs. Accordingly, it seems advisable to consider and execute such strategies before they are possibly either restricted or eliminated. With higher top income tax rates and long-term capital gains rates for affluent taxpayers (along with a new health-care tax on investment income), as well as a new modest top estate tax rate, income tax planning and stepped-up basis considerations seem to have become more significant. We hope this summary of the Heckerling Institute on Estate Planning presentations will be helpful for individuals and families considering estate planning in the new post-atra world. Hawthorn and PNC do not provide legal or accounting advice and neither provides tax advice in the absence of a specific written engagement for Hawthorn to do so. Please discuss your specific situation with your legal, tax, and accounting advisors before adopting any estate planning strategy. The author gratefully acknowledges the substantial contribution of Michael Monroe, Vice President and Market Director of Wealth Strategy. 11

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