A View from the Audience at Heckerling (2016): Part I

The recently concluded 50th Annual Heckerling Institute on Estate Planning in Orlando, Fla. celebrated this conference’s golden anniversary with an eclectic program that illustrates just how significantly the estate-planning landscape has transformed following the American Taxpayer Relief Act of 2012 (ATRA).   We can no longer assume that the predominate purpose of the estate-planning team is minimizing estate taxes – rather, a broad spectrum of client needs occupy the forefront, and minimizing estate taxes is only one piece of the puzzle.  Yes, it’s true that we continue to eagerly await the promulgation of proposed regulations under Section 2704(b) of the Internal Revenue Code that could severely reduce the availability of discounts for lack of marketability and lack of control for certain closely-held family entities.  But deserving of equal attention are matters such as: the need to plan for the special needs of elderly individuals with diminishing cognitive abilities; the importance of maintaining flexible provisions governing the appointment, succession, removal, oversight and powers of trustees; and saving income taxes (including via portability of the applicable exclusion amount of the first spouse to die to maximize the extent of the step-up in basis upon the second spouse’s death).

Moreover, the world continues to become smaller – both as a result of continued advancements in technology and due to initiatives commenced both in the United States and abroad to combat money laundering and to promote tax transparency.  Privacy is much harder to come by with the ubiquity of Google and social media.  Simply put, many of our practices as estate-planning professionals are morphing before our eyes.

Planning for Diminishing Cognitive Abilities and Avoiding Guardianships

“We are estate counselors, as much as we are estate tax planning advisors.”  These were the words of Martin Shenkman, who, together with Jonathan Blattmachr, punctuated the conference’s overriding theme of a changed planning landscape in their concluding presentation. 

Statistics confirm that our clients are living longer than ever before.  That simple fact, coupled with the dramatic increase in the federal estate tax exemption together with the permanence of portability under ATRA, has in many instances altered our clients’ priorities to focus primarily on the following considerations:  (1) ensuring that they have sufficient income to last the remainder of their extended lifetimes, and (2) helping to keep them out of guardianship proceedings as their cognitive abilities diminish over time.

The loss of cognitive ability and the onset of diminished capacity don’t form a cliff that our clients suddenly fall off of.  Rather, they present an extended slope that requires constant monitoring so that we can effectively implement a plan of action to significantly reduce the likelihood that our clients will have their civil rights compromised through a guardianship proceeding brought by a disgruntled family member.  This was the principal message of the excellent presentation on guardianships (and avoiding them) by Diana Zeydel.  We can plan to minimize taxes to our hearts’ content.   But, if at the end of the day, our client’s civil rights have been effectively compromised by a guardianship court order because we haven’t provided adequate less restrictive alternatives to a guardianship, have we truly served our clients in the best possible way? 

What this all boils down to is the need to reexamine the role of many of the frequently lesser emphasized tools in the estate planner’s toolbox and to infuse our clients’ durable powers of attorney, health care powers of attorney (with HIPAA waivers) and living wills with clear guidance to help defend against (and deter) an unplanned for guardianship proceeding.  There’s no reason why extensive personal care instructions can’t be set forth at length in the durable power of attorney.  This is an area in which the greater the detail, the better, as such provides guidance both to advisors and the court in carrying out our clients’ wishes.

Kevin Matz is the managing attorney of the law firm of Kevin Matz & Associates PLLC, with offices in New York City and White Plains, N.Y.