Estate planning and probate attorney
Carol Kao talks with her clients about the
two certainties of life: death and taxes
INTERVIEW CONDUCTED AND EDITED BY ERIK LUNDEGAARD
PHOTOGRAPHY BY FRANK ROGOZIENSKI
Q: Any thoughts on the Obama tax deal
from last December from an estate tax
perspective?
A: It was a nice surprise. It’s providing the
taxpayers an opportunity in the next couple
of years to do some tax planning that was
not available in the past.
Q: By “taxpayers,” you mean anyone with
an estate worth more than $1 million,
correct?
A: That’s right. Without the change, for
2011, we would’ve gone back down to a $1
million-dollar estate-and-gift-tax credit
with a maximum rate of 55 percent. [As
opposed to, under the deal, a $5 million
credit and a maximum rate of 35 percent.]
In Southern California, nearly anyone who
owns a home would’ve fallen into that [$1
million] category.
Q: So in nuts-and-bolts terms, what does
this mean for your practice?
A: I will be able to help and counsel many
of my clients about different gifting options
that will help allow them to utilize the
increase in credit. For example, they can
transfer interest in real estate property,
which at this point in time may be an ideal
time to make that transfer. The value of
real estate is probably at a relatively low
point. So when you make a transfer of that
at low value, that’s the value they’re going
to use for gift tax purposes. Any future
appreciation will be in the hands of your
beneficiary. That’s one manner that’s pretty
straightforward.
Q: By raising the estate tax credit from
$1 million to $5 million, does this cut
into your client base? Because those who
have an estate worth, say, $2 million,
don’t need to rely on your expertise.
A: It does not have any significant impact.
We have developed an expertise in
planning for high net worth families and
individuals. So for many of our clients, the
estate tax component is still there.
It could influence some families with
smaller estates to not pursue planning,
but I’m not certain that’s really good
advice for them. There are always issues
that a family would want to address in
doing the estate plan. How the assets are
transferred to their children, for example.
If you have a child with special needs,
you want to consider those issues. If you
have children from a prior marriage and
children from a current marriage. There
are always issues apart from the pure tax-
planning aspect of it.
Q: Do you get in touch with your clients
every time there’s a change in the estate
tax?
A: There always seems to be some change
going on—whether it’s a California law
change or a tax law change—and it’s
probably not efficient to update clients
on all small changes. When something
significant occurs, like it did last year, yes, I
do speak to the client and advise the client
of the change and then see what the client
may want to do in addressing the changes.
Q: And if it goes back to 55 percent in
two years? Will you contact them again?
A: We will contact them, but what we do
in our planning is try to build in as much
flexibility as we can in the document that
we’re drafting for them. So they don’t
necessarily have to come in each time a
change occurs.
