Elderly, Infirm, Incompetent Client Many taxpayers will safely assume, reasonably so, that with the new $5 million estate, gift, and GST exclusion that they will never face an estate tax. That may be so. These same taxpayers may reasonably conclude that there is only a small likelihood that in 2013 the estate tax exclusion will drop to $1 million, and the estate tax rate rise to 55 percent. Perhaps all are reasonable. These same taxpayers may further maintain that if these unlikely harsh tax changes do occur, they will then change their will, or begin an aggressive gift program. That may not be prudent . . . or possible. What if the taxpayer is no longer competent to carry out such changes in his or her estate plan to address changes in the law? Planning should be considered now, especially for older or infirm clients, who may be subjected to an estate tax at a lower exclusion amount. Failing to put into place protective measures today may preclude prudent tax-minimizing actions being taken later. While a charitable lead trust can be added to a will to reduce estate taxes, if the taxpayer is not competent to sign a new will, this measure will not be available. Perhaps wills and revocable trusts can be drafted to include tax-minimizing measures to apply if the estate tax exclusion is reduced below the $5 million level. That way, absent a change, these techniques would be self-executing. Perhaps if the taxpayer becomes incompetent, the agent under his or her durable power of attorney can revise the title to various assets, and modify certain beneficiary designations, to bypass the will thereby restoring the intended dispositive scheme. However, what risks does an agent face in doing so? Are such acts really contemplated by the durable power of attorney? Perhaps, too, it is advisable to revise the gift provisions, trust funding powers, and other provisions in a durable power of attorney to broaden them to better deal with this possibility.
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