November 2011 "Two Decades of Estate, Trust & Elder Law Practice"

TWO DECADES OF ESTATE, TRUST & ELDER LAW PRACTICE

By Jennifer & Jeff Hawkins, Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers

We started our 20^th year in estate, trust, and elder law practice in October 2011. Jennifer’s silver hair and Jeff’s receding hairline symbolize of our practice transitions. This retrospective article shows economic and legal changes that may surprise people today. It also offers a glimpse of Indiana’s estate planning and elder law future.

Many clients feared the federal estate tax when our careers began in 1992. The effective estate and gift tax exemption value was $600,000 and the top tax rate was 55% for wealth exceeding $3 million. This may seem like tremendous wealth to some people, but a farmer with barns, grain bins, equipment, and 1,000 acres worth $3,000 per acre could easily exceed that value without having much money in the bank.

Farmers and other business people tried to protect their farms, businesses, and families by purchasing expensive life insurance policies. The tax laws also drove married couples to divide assets into separate husband and wife shares in restrictive trusts so that each spouse’s estate could claim his or her exemption.

Few people feared nursing home care in the early 1990s because monthly nursing home fees hovered below $2,000 per month. Medicaid laws permitted people to transfer assets to family members without excessive penalties, so estate planning required very little nursing home consideration.

Estate and gift tax exemption levels and assets values rose steadily through the 1990s and early 2000s. By 2009, the estate tax exemption value was $3.9 million and Southern Indiana farm prices were reaching more than $7,000 per acre. Congress played a wild game of taxation politics from 2001 to 2010 by increasing the exemptions until a scheduled 2010 estate tax repeal and a 2011 exemption plunge to $1 million. Congress increased the exemption to $5 million in December 2010 and extended the plunge to $1 million until January 2013. Who knows what Congress will do after next year’s elections. Recent farm sales for more than $10,000 per acre may keep some families in the IRS crosshairs.

Long-term care issues replaced federal death tax fears for many Americans over the past two decades. The Indiana Family & Social Services Administration published on its website in July 2011 that the average Indiana monthly nursing home room and board charge was $5,139. That is a $61,668 average annual cost that few Hoosiers can pay without exhausting most assets. With an annual nursing home inflation rate of more than 4% annually, we can expect the average annual nursing home cost to reach $100,000 in the next 10 – 15 years.

Those same families that planned against death tax now worry about nursing home costs. Long-term care insurance and robust estate plans offer some families relief from worry. Unfortunately, false information about long-term care planning flourishes everywhere. Only a few dozen highly trained elder law attorneys around the state study the subject closely enough to offer reliable advice and planning expertise. Careful investigation about elder law attorneys’ experience and reputations can help clients find the right lawyers for the job.