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Larger Contexts Will Affect Estate Planning
by Robert Moshman, JD
an one discern a bigger picture from the many events that transpire during one arbitrarily defined calendar year? Estate planning may not be directly affected by the landmark mapping of the human genome or the discovery of 10 new planets during 2000,
but there were events from other contexts, particularly the economy and the arrival of the E-Signature Act, that may change the direction of estate planning during 2001 and beyond.
The Economy
After the unprecedented expansion of the 1990s, a time to regroup is predictable. But fluctuations in the economy can't account entirely for the year's dramatic stock market reversals. Technology pushed the markets to new heights during the late 1990s, but speculative ventures can't survive on dreams alone. All those dot.com IPOs that created so many paper millionaires had a moment of truth during 2000; they either turned a profit or were humbled. An unlimited fountain of revenues from dot.com advertising simply did not materialize. But the technology-driven surge in the financial markets that just ended may ultimately be seen as the foothill to larger gains ahead. Over the next few years, the creation of new Internet suffixes such as ".bus" will generate a new gold-rush atmosphere for businesses to get started or expand. Taking a long-term view, factors such as global economics, demographic trends, and the full penetration of consumer markets by the Internet, there are excellent prospects for prosperous times ahead. However, that does not mean our economy is recession proof, especially in the near term.
Although transfer tax reform is concerned with long-term economic changes, the political reality will be directly affected by the short-term economic news. How the new administration guides and shapes the next version of estate tax reform may be affected by
the size of budget surpluses and the economy that are reported during the next few years. Consider the reasoning behind the veto of the estate tax repeals: "While I am willing to support targeted and fiscally responsible legislation that provides estate tax relief for small businesses, family farms, and principal residences, the estate tax repeal passed by the Senate is a budget-busting bill that provides a huge tax cut for the most-well-off Americans at the expense of working families. This back-loaded bill explodes in cost from $100 billion from 2001-10 to $750 billion from 2011-20, just when Medicare and Social Security are coming under strain." -President Bill Clinton.
The E-Signature Act
On June 30, 2000, President Clinton signed the Electronic Signatures in Global and National Commerce Act (E-Sign Act). The new law is intended to support electronic commerce by treating electronic contracts, signatures, and records with the same respect as traditional paper documents. Effective October 1, 2000, online contracts, records, and signatures cannot be denied their legal effect or enforceability simply because they are in electronic form. An electronic signature can, of course, be challenged on the same legal grounds as a conventional signature. A signature that is forged or used without consent would be invalid. A signature given without mental capacity would not be valid.
The new law could have a dramatic impact on the flow of paperwork through the commercial and financial world. The law specifically applies to insurance transactions and various loans, but does not apply to wills, codicils, testamentary trusts, divorce and family law matters, court documents such as pleadings and briefs, life insurance, health insurance contracts with state agencies, and other highly sensitive documents. In time, other paper documents may move online as well.
MDPs and Ethics
Financial planning has evolved into a number of areas of great specialization. As a result, the collaboration and coordination of life insurance underwriters, actuaries, tax professionals, and investment professionals are becoming important to many clients. But when the firewalls that insulate one professional from another are pierced, so are the protections that exist when separate professionals each exercise independent judgments.
Certain groups of professionals are already working effectively under one roof. However, the disparity in the ethical standards that apply to attorneys, as opposed to the other professionals, has made the concept of a multidisciplinary practice involving attorneys to be problematic. The American Bar Association opposes MDPs involving attorneys while professional associations of the accounting profession appear to favor an expanded role for MDPs.
We'll Remember 2000
Among all the many notable events of any year, there are many small but precious personal moments that cannot be taken for granted. We therefore extend our best wishes to those we've worked with or reached through this newsletter throughout the year.
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Sponsored by James J. Eccleston. This Web site contains material of general interest. It is neither intended to, nor constitutes, either legal advice or investment advice.
Always consult an attorney and/or investment adviser when building and protecting your wealth.
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