The last two years have been very exciting and challenging. As soon as the Republican leaders figured out that President Obama’s definition of finding compromise and achieving consensus meant everyone acknowledging that he was the only brain in the room and agreeing with his ideas, it was assumed that that the President Bush tax cuts were going bye-bye. Consequently, the estate and gift tax rates were going back to 55% and the estate, gift and generation skipping tax credits and exemption were going back to $1MM.

All the attorneys, accountants and technical gurus were forecasting a perfect storm for the supreme taxacrat—without burning any political capital he could just continue in an unproductive deadlock by being naturally condescending and arrogant; he could achieve a tax increase on small business who he defined as rich; and he could blame the deadlock and resulting tax increase on the Republicans. Because of this, starting in early 2011, the tax planning community has been working on the utilization of the estate, gift and generation skipping tax credits under the assumption that after December 31, 2012, they would be lost. An extraordinary amount of emotional energy has been spent convincing clients that the days of procrastination are over. Use-it-or-lose-it is had become a reality. The days of excuses were over. There was no more:

“Let’s postpone this because it just doesn’t feel right.”

  • “I am not sure my 45 year old son is ready to be a shareholder.”
  • “I don’t know if I would feel secure with only a $30,000,000 estate.”
  • “I don’t want to spoil my 45 year old daughter with gifts.”
  • And of course the best one, “We can start on this next year.”


As succession planners, serving as reliance advisers, we found ourselves in the middle of an emotional wrestling match. It was time to grab hold of some of our most resistant clients and wrestle them into submission regarding significant gifting of as much as $10,000,000. Incalculable time was spent giving assurance that minority transfer of business interests or real estate was not giving up control and that their income security was not being put at risk. There were also the multiple explanations of admittedly confusing asset appraisals, entity appraisals, operating agreements, shareholder agreements, intentionally defective trusts, gift and buy-back agreements, etc. As the clock ticked, the pace of planning and collaboration with attorneys, accountants and appraisers increased. Last summer, in mid-2012, the planning community was at full throttle; schedules were packed out 90 days; clients were feeling pressure and blowing gaskets, and appraisers started cranking up their prices because the alternative was to make promises that they could not keep. Many advisers worked Christmas and New Years, and most of us have action items yet to complete that will conveniently have December dates when all the smoke clears. 

In next week’s post, I’ll discuss the the present state of succession planning as I see it.

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