Millionaires seek shelter in trusts as Bush tax cuts may end
These are hectic days for trusts and estates lawyers, as they make house calls, work nights and fly overseas to meet rich clients before Bush era tax cuts expire.
"To say we're busy is the understatement of the year," said Martin Kalb, chairman of the global tax group at Greenberg Traurig LLP. "I've been practicing for 35 years, and I've never seen it like this."
Unless Congress and President Barack Obama decide otherwise, top rates for estate and gift taxes will rise to 55 percent from 35 percent on Jan. 1, with lifetime exemptions falling to $1 million per person from $5.12 million.
For bequests to non-spouses, an estate valued at less than $5 million won't be taxed if the owner dies this year. Next year, the amount greater than $1 million will be taxed, as things stand now. Money and property in any amount left to a surviving spouse isn't taxed.
Obama and House Speaker John Boehner have been meeting regularly in an effort to reach a compromise on taxes.
The president has repeatedly vowed he will insist on raising rates on the wealthy. As a result, many are scrambling to make gifts, either outright or through trusts, to spouses, children, grandchildren and others before the year ends.
"On Jan. 1 the coach will turn into a pumpkin," said Gideon Rothschild of New York's Moses & Singer LLP
Many people with more than $10 million of net worth had a wait-and-see attitude before the Nov. 6 election, because they thought Mitt Romney was likely to become president, said Dennis Belcher, a partner at McGuireWoods LLP in Richmond, Virginia.
"We are in effect squeezing two years of work into two months, notwithstanding the fact that we had contacted people and let them know what was going on," Belcher said.
Those who waited may find it hard to hire lawyers because trust creation is time-intensive, involving counseling on their goals and finances, and not just generating documents.