Credit - Current Techniques of Planning

Classic estate planning was limited, based on two prime principles: thrift and sound investment. These still apply; they are still at the heart of estate creation. But other elements, just as organic to the successful estate plan, have been grafted onto them.

One such element is surely at the core: tax relief. The old techniques paid only peripheral attention to taxes. They did not constitute a major block to capital accumulation in former days. But today, as we have seen, our economy is tax saturated with complex and ever-changing tax laws, and no estate plan is worth its effort, unless it, in turn, is saturated with tax relief. For, although current tax law schedules estate taxes to disappear in the year 2010, they are scheduled to return to 2001 rates in 2011.

The guideposts which point the way to tax relief are contained in the tax laws themselves, in the numerous preferential openings these provide for tax-favored methods of capital accumulation. We call these openings tax shelters. And shelters they truly are, places of refuge from the heavy downpour of both estate and income taxes. In essence, the term "tax shelter" refers to various ways and means of making investments, transfers, and compensation arrangements that result in profits or accumulations from which some of the burden of tax erosion has been lifted or deferred. Tax shelters run like a thread through the maze of estate-creation techniques. A second element is equally important, equally integral to the contemporary estate plan. Properly speaking it is not a technique but an opportunity: the opportunity for capital accumulation that lies in a person's own occupation.

The catch-all term for it is "fringe benefits," the variety of plans offered by many employers to their employees as additional compensation above and beyond their salaries: the profit-sharing, pension, and savings plans, the deferred compensation arrangements, the group medical and life insurance contracts, long-term care insurance, all the extras that are tacked onto a person's salary and which can-although he may not be aware of it-form the basis of a lifetime estate building plan.

Fringe benefits have been part of the corporate way of life for many years, but they came of age during World War II and have continued to expand during the ensuing decades. By now the term "fringe" is really a misnomer. Depending on the individual and the company that employs him, they are no longer the frosting on the cake, but the cake itself-so far as estate creation goes.

This is true for three reasons: first, they operate as a sort of semi-compulsory savings plan. Unlike regular salary compensation they are usually deferred and held in reserve for a number of years. This aspect has obvious importance to the planner, who is bedeviled by the pressures of our times to spend whatever monies he has on hand. Second, they are ordinarily invested for the benefit of the employee, thus providing him with a built-in investment program. And third, most of them are tax-sheltered. All in all, quite a package.

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