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So far the year 2001 has not brought the monumental changes in our estate tax system that many of us
expected after the cliff-hanger election was finally decided. At this writing the outcome of the Congressional
negotiations is far from clear, except for one thing. It looks like we are going to have estate taxes and gift taxes
to contend with for at least another 10 years, at best. Don’t count on the transfer taxes going away completely
even then. There is too much potential revenue for the government in the years 2011-2021, for Congress to
turn their back on these taxes. Of the general wants the Feds to spend money, and the estate taxes come
from only about 2% of the population. What have we seen in the first five months of 2001?

! FROZEN IN THE HEADLIGHTS.

Tax payers and advisors have been frozen, for the most part so far this year. We have all been waiting for
definitive legislation from Washington that will miraculously banish the transfer tax system that we have had
since 1916. Much planning that is greatly needed has been avoided or postponed. If your Clients are Forty
years old, they can statistically afford to wait it out. If your Clients are over Sixty they are gambling with their
families future if they procrastinate. You should advise your clients that transfer taxes are not going away.
Rates might come down (this looks likely). Exemptions may go up. This may solve the Sixty year old, but don’t
count on huge relief, if your Clients are Seventy-Five and older.

! CLIENTS HAVE MOVED.

We have a lot of new residence in Northern Michigan. Many of you have new or, relatively new, Clients whose
previously professional contacts have been downstate or out-of-state. We are seeing Clients who have
changed financial advisors, CPA’s, and have lost touch with their attorneys, who had originally drafted their
estate planning documents years ago. This is a scenario ripe for disappointment when it comes to the
necessary integration of CPA, financial consultant and attorney.

!CHANGE OF CIRCUMSTANCES.

What professional advisor has not seen dramatic changes in financial circumstances of their Clients in the
last five years. We have been on a roller coaster with Clients net worth going up and down like a yo-yo. Those
with lake front property, on balance are up. A few less fortunate Clients may have seen declines. Families
have changes-children born-deaths-divorces. Make sure your Clients have had their documents reviewed
within the last five years and urge them to do so for at least every five years going forward.

! MANY TRUSTS ARE OLD.

We many Clients whose Trusts are Seven to Twenty years old and have not been updated to current tax and
net worth levels. If you Clients have a joint trust, this could be a time bomb. Joint trusts are tricky from a tax
stand point, at best. Many old joint trusts need immediate revision because they will not afford the protection
your Clients expect. Let’s face it, there is enough misconception about what a trust can and cannot due
without letting them get old and moldy.

! NEW REAL ESTATE.

We have seen time and again that Clients change houses, particularly when they move up north. Many time
the residence does not get titled in the name of the trust or trusts. Maybe it is joint between husband and wife,
or in the name of one spouse of the other. In any case there are often unintended tax and probate results.

! NEW FINANCIAL ACCOUNTS.

Many Clients have transferred their accounts to the local offices of their financial consultant, or changed firms
completely. The new accounts are often not in the names of the trust, or fail to have POD or TOD
designations. Again, the Clients may have a probate estate or miss an estate tax exemption, because of
these details were overlooked.

! NEW IRA MINIMUM DISTRIBUTION ROLES.

The new IRA distribution regulations are a boom to most tax payers. IRA’s can be stretched-that is the good
news for most everyone. If tax planning was done under the basis of the old rules, estate plan should be
revisited. Many of the traps have been eliminated, which should be a relief to all professional advisors.
However, IRA’s and their potential for double or even triple tax are still the 2000 pound gorilla in many estates.

! HEALTH CHANGES.

Health changes and the possible need for nursing home care is the monkey wrench in the best of plans.
Who can foresee Alzheimers? When the symptoms appear its time to take a hard look at the estate plan to
see how nursing home costs are going to be paid for. Those of you who can advise or sell long-term care
insurance should continue to remind your Clients to take this precaution while they are still healthy and can
afford the premiums.

! CONCLUSION.

Our firm has consolidated its Elk Rapids and Traverse City offices into a new building at 1241 E. Eighth
Street, Traverse City, MI. We are still meeting with Clients at the Elk Rapids office and offering at no charge,
home visitation for the convenience of Clients. We always welcome referrals for your Clients planning needs,
whether they would be to serve family purposes, tax reduction, or medicaid eligibility. As a professional
advisor, we can serve your Clients best by doing a good job for them at a reasonable price.


©BRANDT, FISHER, ALWARD & ROY, P.C.

This newsletter is provided for informational purposes and should not be acted upon without professional
advice.
WEALTH CONSERVATION:
PROFESSIONAL ALERT
Brandt, Fisher, Alward & Roy, P.C.
May 2001
WHAT’S HAPPENING?
by James R. Modrall III, J.D., C.P.A.
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Brandt, Fisher,
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