October is Breast Cancer Awareness Month

October is Breast Cancer Awareness month.  All of us probably know somebody who has been affected by breast cancer.    According to Cancer.org, breast cancer is one of the most common cancers among American women, next to skin cancer.  Because of the huge efforts of breast cancer walks and campaigns, women today have more educational and diagnostic tools available to them than ever before.  The odds of surviving breast cancer are strongly tied to how early it is found. Matlin & Associates genuinely cares for our clients and wanted to do our part to get the word out. This month we made up pink Post-It ™ booklets containing pink pens and a message inside.  Our hope is that each time our clients use these booklets, it will remind them to be educated and take the necessary steps available to them in order prevent or fight this disease.


As estate planning attorneys, we work with clients and their families and have listened to the stories they have shared with their breast cancer experiences.   Whether you’re going for preventative exams and testing, or you are going through treatments, think about updating your Power of Attorney for Health Care and HIPAA documents so that you maintain control of who can make health care choices and have access to your medical information. If you have questions regarding these estate plan documents please feel free to give Matlin and Associates a call at 1-847-770-6600 or via our contact page http://www.ericmatlin.com/contact-estate-plan-attorney.html

If you wish to make a donation to honor someone you know who is affected by breast cancer, here are two links to websites that accept donations:



January 2012 Five Federal Estate Tax Observations

January 2012 Five Federal Estate Tax Observations 

  1. The 2012 exemption from federal estate taxes is $5.12 million per person, up $120,000 from 2011. That number will fall to $1 million on January 1, 2013 unless legislation is passed by congress and signed by the president prior to that date.
  2. The past decade of uncertainty over the direction of the federal estate tax exemption has resulted in a lack of consensus among estate planners regarding what’s next. I do not know the answer, but my goal continues to be assisting families with the big picture, using tried and true techniques, without the need for contortions.
  3. Few serious estate planning professionals are relying upon the existence of federal estate tax exemption “portability” as a means to minimize estate taxes, except as a last-ditch post mortem effort to save the exemption of a first-to-die spouse who has not planned. I listened to one continuing legal education lecturer who ridiculed it as “portapotibility.”
  4. This may be a great time for wealthy people to make family gifts of million of dollars, especially to multiple generations. There is risk of a future “clawback” of the gift back into the future estate that should be considered, but even if that occurs, all appreciation will be removed from the grantor’s estate, who also gets to see the beneficiaries enjoy the assets while still living.
  5. If you are considering a grantor retained annuity trust (GRAT) to make an irrevocable gift of an asset’s future appreciation, this is a good time to act. Proposals have been made that may eliminate the technique of using short term GRATs and those that “zero out.”

The Latest in LGBT Estate Planning: Challenges to DOMA

The Defense of Marriage Act (“DOMA”), signed by President Clinton in 1996 defined marriage for federal purposes as the union of a man and a woman. Various appeals are working their way through the federal court system that challenge the constitutionality of DOMA. Among other things, DOMA is contrary to the doctrine of Full Faith and Credit usually given by one jurisdiction to another under conflict of law principles.

 The Obama administration announced on February 23, 2011, that it would not defend DOMA in federal court. It believes that the law is unconstitutional because it is discriminatory.

 The effect of DOMA on estate planning is that neither the unlimited marital deduction nor the new “portability” of unused applicable exclusion amounts between married couples of the same gender are recognized under federal law, potentially resulting in adverse estate tax results to gay and lesbian couples compared to married couples of different gender.

 It is unlikely that DOMA will be overturned in Congress during the current session. Generally, Republicans, who control the House of Representatives, favor DOMA. Therefore, until DOMA is actually overturned in the federal court system, the announcement by the Obama administration has no effect on estate planning for LGBT couples in states where they are legally married. You can expect that a challenge to the constitutionality of DOMA will find is way to the Supreme Court sooner or later, probably this year. At the Supreme Court, as it is currently composed, you may expect a 5-4 vote, which could go either way.

 If DOMA is overturned, then the unlimited marital deduction and portability will indeed be available to married couples of the same gender. None of this affects same-sex couples whose status is that of a “civil union.”


By Estate Planning Attorney – Eric Matlin

The Middle Class Tax Relief Act (the “2010 Tax Relief Act”), signed by President Obama on December 17, 2010 (two weeks before a re-set of the federal estate tax exclusion to $1 million per person) threw the classic use of shelter trusts into turmoil by introducing “portability” into the equation.
Portability of unused transfer tax exemption is completely new, though it has been discussed for years. Legally married couples who are of different genders will not have to divide their estates in order to shelter assets from estate taxes because any unused estate tax, GST exemption and lifetime gift amount of the first-to-die spouse is added to the surviving spouse’s unified exemptions.
For the very wealthy, it provides spectacular opportunities to make gifts, potentially in perpetuity, utilizing various retained interests trusts and estate freeze vehicles.
For people who are simply affluent, though portability may make the division of some married couple’s assets for estate tax planning unnecessary, it spawns a few other considerations:
• It requires the filing of an estate tax return upon the first spouse’s death that is purely informational. The value of the first spouse’s estate is left open on his/her return until the second spouse dies. Upon the survivor’s death, if his/her estate exceeds the exclusion amount existing at that time, then the excess is used to fill up the first-to-die spouse’s exclusion amount (as it existed back then?) before the survivor’s estate is taxed.
• If it turns out that the survivor’s estate is below the exclusion amount, then the legal/accounting fees spent on the first death was a waste of time and money.
• With the estate tax laws constantly changing, is it worth the effort to file a return on the first death that might ultimately not otherwise be necessary?
• It only applies to most recent spouse’s unused credit, so if the survivor remarries, that also renders the first informational return a waste.
• Like all of the provisions of the 2010 Tax Relief Act, it is applicable only for the years 2011 and 2012.
• It does not work for gay and lesbian married couples, as their marriages are not federally recognized. Then again, the unlimited marital deduction does not work for them for the same reason.

1/1/11: The Estate Tax Deal

The world of estate planning has had a chaotic year throughout 2010 because of the shifting sands of the estate tax. Over recent months, the lurking date of January 1, 2011 caused some hysteria in estate planning circles reminiscent of Y2K. Just like that moment turned out to be a non-occurrence of the Al Capone vault variety, this one is shaping up as somewhat anti-climactic as well.

Last week, a new tax bill finally passed both chambers of Congress and was signed into law by President Obama on Friday December 17.

A brief review of the strange recent history of estate tax:

2009: Last year, in Aught 9, estates worth less than $3.5 million estates were exempt from federal estate taxes. At the time that was the highest exemption in the history of a tax that has continually been part of the Internal Revenue Code since 1916. The highest rate was 45%.

2010: This year, the estate tax disappeared. By picking a spectacular year to die, Dan Duncan’s family saved quite a few dollars on his $9 billion dollar estate, as did George Steinbrenner’s on his $1 billion estate. Elsewhere electrical plugs are in readiness to be pulled in the coming days. Suicide, assisted or otherwise, may still loom for the uber-wealthy, because…

In 2011, federal estate taxes return, though not with the vengeance that would have ripped into many middle class estates had the Washington power structure not reached a last minute deal. The estate tax, dead all of this year, will return to life like a zombie on New Year’s Day, but at a higher exemption/lower top rate than ever before. The exemption, through 2012, will be $5 million per person, affecting only the top ¼ of 1% of wealthy Americans. The top rate will be 35%.

Without the December political compromise (or capitulation, depending upon your viewpoint) all estates greater than $1 million for people dying on or after 1/1/11 could have faced taxes as high as 55%. As it is, the estate tax moment of trust has simply been delayed for two years.

I would say to the wealthy people who followed their planners’ advice and made gifts in excess of their lifetime exclusion of $1 million (“because the top bracket is never going to be this low again”): though you have to write an IRS check this coming April, and if you gifted appreciated assets your heirs may have to pay a higher capital gain someday than they otherwise would have, take solace in the fact that all growth in the amount you divested will, in fact, take place outside of your estate. It is possible that eventually your estate will save taxes overall, especially if the gift was made to grandchildren.

State estate taxes will also return to many states on 1/1/11. In Illinois, the exemption threshold will probably, though not necessarily, be the same as the 2009 level, $2 million per person. This could mean that, without the proper “Q-Tip” language in a shelter trust (or the ability to use a disclaimer to effectuate the equivalent of a Q-Tip trust), over the next two years a fully funded shelter trust of $5 million for a first-to-die spouse who is an Illinois resident will result in the surviving spouse paying a state estate tax in excess of $350,000. Granted that the Illinois estate tax bracket, for estates in that range is between 8% and 12%, far less than the prospective federal rate of those same assets with appreciation added in, but writing checks to pay taxes sooner rather than later is generally not a very appealing prospect.

Between now and 2013, there will continue to be debate on the whole range of tax issues. President Obama will then either begin his second term in office with a new public mandate or he won’t. There is no doubt that the newest estate tax is a direct manifestation of the midterm election’s national lurch rightward, for better or worse. What happens with estate taxes in 2013 and thereafter is anyone’s guess, but without a new law prior to that, the reset goes back to the $1 million per person exemption and 55% top bracket.

A few other points in the new estate tax law:

*The 2010 capital gains treatment on basis step-up can result in greater taxes than the estate tax would have been had it not disappeared. the new tax agreement provides that these 2010 estates, usually worth somewhere between about $1.3 million and about $4 million, will be given an election to pay the lesser tax, whichever one that may be.

*The GST tax exemption will continue to be equal to the transfer tax exemption in 2011-2012, as it has for the past decade. This allows families to push more money into future generations without the punitive generation skipping tax being assessed.

*The estate tax exemption will be “portable” in 2011-2012, so that any unused exclusion following the death of the first-to-die spouse will be added to the surviving spouse’s exclusion by an election made in the federal estate tax form 706 of the first-to-die spouse. The complicating feature of portability is the reality of the multiple divorce and marriage cycle, though in its final form, a surviving spouse can only use the most recent spouse’s unused credit. This provision may make the division of some married couple’s assets for estate tax planning unnecessary.

*The lifetime gift exemption in 2011-2012 will be raised from $1 million to equal the applicable exclusion amount of $5 million for the next two years. This is a similarity to the old “unified” estate and gift exemption that existed prior to the 2001 Tax Act.

*Inflation adjusters are built into the exclusion amount, with increments being rounded to the nearest $10,000 per year. This is only important for one year, 2012, and only then if there is much inflation in 2011.

Estate Tax Cynicism-Thank you Paul Krugman


After years of speculation about what is going to happen to estate taxes—they disappeared this year but come roaring back next year at a low threshold if nothing is done soon in the U.S. Congress, an opinion piece in the N.Y. Times by Paul Krugman caught my eye.

 Mr. Krugman reports that Republican Senator Jon Kyl recently said that he would block a bill extending unemployment benefits and health insurance subsidies for the jobless for the rest of the year unless a new agreement can be reached on the estate tax. It reminds me of the time that a 2006 bill raising the minimum wage was packaged with permanent estate-tax elimination by now-retired Republican Senator William Frist.

 The House has already passed a bill that continues to exempt the assets of couples up to $7 million, leaving 99.75 percent of estates tax-free. Apparently that is not enough for Mr. Kyl, who seems willing to hold up desperately needed aid to the unemployed on behalf of the remaining 0.25 percent of the wealthiest Americans among us.

Why Do Estate Planning?

Just a little Friday piece of estate planning philosophy. I’m tired of talking about the non-existent estate tax, so here’s today’s serving:

In most cases, an estate plan simplifies the transition for your family and serves as a tool to defuse foreseeable problems. Few things can tear families apart as easily as dividing an estate. Think carefully about your relationships and envisage things that can go wrong in your aftermath. You may have simple, prosaic estate planning issues to address. On the other hand, your thoughts may drift toward the bigger picture of your literal and spiritual place in the world you will someday leave behind. Either way, you gain insights into yourself via the process. This alone makes estate planning worth the effort. Simple or complex, it is your life and your estate plan.

Question: “What can I do right now to prepare for what follows my death?”

Answer: “Plan my estate.”

Another question to answer is:

“I’m not doing estate planning for myself. I’m doing it for