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Archive for December, 2010

Richard Tremaine: An Open Letter to the US Congress


“… in the world nothing can be said to be certain except death and taxes.”

— Ben Franklin

When I read the initial news reports that you were going to amend the estate tax as part of the Tax Cut Extensions Bill (H.R. 4853), I was thrilled. Finally, you had taken some action to provide us with some rules and some guidance that would carry into the future. I had mentally started a letter of thanks to you. Then, I learned that the estate tax amendments only were for two years. Then, I saw more details that there are other revisions that will affect how estate planning is done and how documents are prepared. Then, I realized that this was just more “business as usual.”

I am writing yet again to request that you give some serious attention to the estate tax, and provide us — since we are all affected — with some clear tax rules that will apply for the foreseeable future. Your collective intransigence on this issue is unconscionable, when the limited range for potential compromise is so clear. Your failure to act leaves us to plan a year at a time, rather than for the long term. Perhaps if you were able to enact a long-term estate tax plan, Congress also could enact other long-term legislation. You might even end up with some major programs that make some sense and are not simply driven by the most potent special interest group of the moment. But I digress.

When you amended the estate tax in 2001, you created a challenge because the rules changed every few years all the way to 2010, when the estate tax was briefly repealed. When consulting with clients, I had to describe the existing rules and the changes that would occur in the rules during the next several years. Although this was a pain, it still allowed us to collectively plan; for example, in 2002, we at least knew what the rules would be in 2008. Our clients could make a rational decision and plan for at least six or seven years.

In my experience, when people sit down to prepare a will and to plan for the distribution of their assets after they are deceased, they want to know, “How much of my estate will be needed to pay taxes to the federal government?” Depending on the answer to this question, they may have the additional question, “What can I do to minimize the amount that goes to the government and maximize the amount that goes to my family, friends and charities?” If there are clear rules, an attorney can respond to these questions and help clients develop a plan. Conversely, without rules, an attorney and his client are left to guess what you might do and when you might do it, and to try to make family bequests based on our “best guess.”

So maybe all we need to know is what The New York Times reported — that with the exemptions created by Congress for the next two years, very few people will have to pay estate taxes. All they have to do is to die in 2011 or 2012. Maybe we just shouldn’t worry that in two years, when another Congress fails to take action, the rules will revert to the rules of 2001, and suddenly, the estate tax will affect a large portion of the population.

By your past actions, you have proven that the only thing we can count on is continued uncertainty and the likelihood that you will not amend the estate tax again in the next two years. It’s just not important enough to you or to the lobbyists who have your ear.

Frustrating? Yes. Who is to blame — the Republicans or the Democrats? Yes. The fact is that neither those who wish to see a stringent estate tax that affects nearly everyone nor those who would repeal the “death tax” forever have sufficient votes to bring about their desired result. Therefore, the range of acceptable compromise looks to be somewhere between the 2009 rules ($3.5 million individual exemption; tax rate of 45 percent after exemption) and the 2011-12 rules ($5 million individual exemption; tax rate of 35 percent after exemption).

How about compromising halfway between the two sets of numbers and adding an inflation factor so that these numbers can adjust upward or downward in step with the overall economy? This could set a plan and rules for 10 or 20 years; then, we could plan. And you could, too.

Sincerely yours,

Richard Tremaine

Originally published in The Steamboat Pilot & Today

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Tremaine: Seeking that Perfect Christmas Gift? Think Tractor

If you have a real farm or ranch, a tractor is an essential tool that is part of your life. However, if you have an acre or a few acres, you should consider a tractor as an item for your gift list or your wish list.

With the ownership of land comes the need for its care and maintenance, and the best tool for the job is certainly a tractor. I looked for utility: a small diesel tractor with about 27 horsepower, including a bucket on the front end and a backhoe on the back. The plan was that this tractor would help with clearing dead trees and stumps and have the utility to dig a trench for a culvert under the road or driveway. It worked great for these basic needs.

In subsequent years, the tractor was used to build a cabin. It cleared and rough graded the foundation area. It dug the trench for an electric line several hundred feet through the woods. It carved out drainage ditches to carry water away from the cabin site. When the front wall of the cabin first went up, it resembled a squiggly line, and the tractor pushed the frame at key points resulting in a stable, straight line. With the bucket, the tractor lifted supplies, including a very heavy set of french doors to the upper level of the cabin.

After the tractor worked in the woods all one summer, it seemed fitting to bring it to our lot in the city to clear snow for the winter. Although it mostly did the job, this was one of those winters with snow that wouldn’t quit, and by the time we had built our snow piles to 8 feet high, the little tractor had done all it could. Our professional plowing company had to be re-called to finish the snow removal for us, and this experiment went into the lesson books. The tractor now stays at the ranch in the winter.

In recent years, the tractor has worked at clearing brush and creating paths (with the help of a bush hog attachment) and at digging up areas of the city lot for growing fruits and vegetables. When you get to dig the garden area with a backhoe, you easily can stir the dirt down to two or three feet deep and know that a crop like potatoes will have a large area to grow. And if you have had the pleasure of digging potatoes — crawling around in the dirt, dripping sweat, wiping streaks of dirt across your face, and digging gently in the dirt up to your elbows with sore fingers trying to preserve the thin skins of the fresh vegetables — then you will appreciate the luxury of digging those same potatoes out of the ground with a backhoe. (When I shared the idea of this technique with our local extension agent, he smiled and said, “Yeah, I do that too.”)

Of all the tractor stories, my favorite is a recent one from fall, when a large skunk had decided to move in and feast on my grandson’s chickens. The henhouse at the ranch is only a few inches off the ground. The skunk had burrowed underneath and would crawl out at night to wreak havoc with the chickens and the eggs. When its smell gave its presence away, my son got his .22-caliber rifle, my grandson got his flashlight, and they went out one evening and dispatched the skunk.

Unfortunately, the skunk was well under the henhouse and not reachable. The prospects of dragging this foul-smelling critter out by hand or living all winter with the smell of a rotting dead skunk were not appealing. Enter the tractor. The tractor was pulled over close to the corner of the henhouse, and the bucket pushed under the base. With just a bit of lift, there was room to reach under the henhouse with a hand-hoe and pull the skunk free. With a quick flip of the hoe, the skunk was in the tractor’s bucket and headed for a permanent location that would be created by the backhoe.

So before you finalize your wish list (or your gift list) for this Christmas, give some thought to a gift that will serve you for a long time in ways that are limited only by your imagination. You can’t go wrong.

Originally published in The Steamboat Pilot & Today

 

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