Right now, much of the workload is being caused by the rush to place assets in protected trusts. Overworked appraisers are being stretched to their limits in trying to value a whole host of difficult-to-appraise assets - from privately held companies to real estate to ownership stakes in non-traditional holdings.
Despite a large staff, Oshins says he could end up having to turn clients away. "We are getting to the point where I can take new clients only when I can do a simple asset gift," Oshins says.
Because dynasty trusts are an Oshins specialty, the firm actually has customized trusts for most of its regular clients, says Richard Oshins, an estate lawyer at the firm (and Steve Oshins' father). The firm is well-positioned to do this work because it's based in Nevada, one of several states with the most protective laws regarding dynasty trusts.
Trusts set up in Nevada, they say, will protect assets for 365 years following the death of a grantor's youngest living descendant at the time a trust is created. (Shenkman, for example, often asks the Oshins to set up Nevada trusts for his clients.) Other states with optimal dynasty trust laws include Alaska, Delaware and South Dakota, where trusts may be set up that last in perpetuity, the Oshins say.
PERSUADING CLIENTS
Another challenge for planners: Some clients simply took too long to understand the urgency of making changes this year.
In Virginia, many of Tim Lee's clients are people with assets ranging from $5 million to $50 million in the value of companies they founded and own, he said. If they fail to place those companies into trusts, their heirs run the risk of having to sell the companies to satisfy the roughly 50% estate tax bills to the IRS, Lee says.
"Most of the people I know who are in that bucket have two views of their wealth. One, I need to make my future comfortable, and two, I need to know my wealth will be passed to future generations in a way that reduces tax liability," Lee says. "We've had discussions with pretty much all of our clients about it this year."
Some of the most difficult clients to engage are those who still think of themselves as so young that they aren't yet thinking about estate planning.
Lee says he took one 45-year-old client out to lunch repeatedly to explain to him, in great detail, why he should place his current wealth into trust now.
Lee urged the client - who had a net worth of $30 million to $40 million, largely in a business he owns - to put a gift of about $15 million into a family limited liability corporation. The LLC would act as a "unifying tool" to bring a lot of disparate assets, in real estate, hedge funds and other instruments, into one basket. Then, the LLC would go into a dynasty trust.
The nearing deadline finally pushed the client to sign the trust into effect on Sept. 29. "We've been running since then to get all the documents in place," Lee says.
Ann Marsh is senior editor and West Coast bureau chief of Financial Planning.
EMERGENCY WORKAROUNDS
Several experts say there are several workaround strategies available to clients and their planners to take advantage of the deadline to entrust assets under current laws.If clients lack the time to fully appraise assets, they could take some of the following steps now, according to Las Vegas estate lawyer Steve Oshins.* As a stopgap measure, place liquid assets that do not have a valuation requirement into a trust. The trust can then include a power for the client to swap out those assets later in exchange for a share or percentage of another asset that must still be valued.* Tailoring a document (sometimes called an assignment) to state the client's intention to transfer a specified dollar amount of an asset into a dynasty trust, instead of a fixed percentage interest in that asset or entity, may allow the client to avoid the tax risk of transferring more than the $5.12 million exemption. This strategy also permits the client to await an appraiser's valuation of that asset at a later date. It accomplishes the asset transfer for tax purposes now, but allows the client the freedom of determining how many shares, or what percentage, of an asset ultimately will be placed into the trust. However, Oshins cautions, clients need to get an appraisal as soon as possible after creating the assignment in order not to raise red flags with the IRS. Creating the assignment document itself is not complicated, Oshins says. "I could dictate it to you over the phone and you could say I hereby assign $5 million in voting interest [in a certain company] to be transferred on this date to ABC irrevocable trust," he says. "That's how simple it is." But don't forget the notary.* Have an estate lawyer create a simpler trust into which assets will be placed this year, but include a provision empowering a friend as trustee to make changes to the trust's structure later. Doing so will enable a law firm to get assets into a trust rapidly and then take the necessary time in the new year, after some of the current workload has abated, to further customize a trust to a client's needs, according to Oshins.
