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Close-Up: Ted Cranston

Estate tax laws may complicate planning

Ted Cranston, a partner with DLA Piper San Diego, believes that many people don't want to face the realities of life, mainly that they will some day die.

"Often people take care of everything else in their lives, but they don't want to face the reality that they will die and their family will take over their estate," he said. "Many people avoid these discussions for as long as possible, and sometimes until it's too late."

Cranston concentrates on estate planning; estate, gift, generation skipping and fiduciary income taxation; living trust formation and administration; irrevocable trust planning, charitable planning; family business succession; and family limited partnerships.

Ted Cranston

He is also listed in "Best Lawyers in America" for his trusts and estates practice.

Cranston suggests to his clients that they not avoid decisions in the planning areas. He helps ease his clients' worries about the crucial decisions needed to be made during their capacitated times so that others do not have to determine them -- or debate them -- after they die.

"A lot of personal issues come to the surface during this process," Cranston said. "I really do become not only the client's attorney, but a counselor and a friend."

Cranston offers his clients a variety of trusts, such as revocable living trusts, irrevocable trusts, special needs trusts and charitable trusts, among others, and a last will and testament.

As far as the Economic Growth and Recovery Act of 2001, a law intended to repeal the federal estate tax is concerned, Cranston said it will be tough to predict exactly who will really benefit from the uncertain tax rules.

Generally speaking, the federal estate tax limits the amount people can pass tax-free to their heirs, other than a spouse. Prior to the act, the amount one could pass was $675,000 per person -- the "exclusion" amount -- and the maximum estate tax rate was 55 percent. A person may pass an unlimited amount to his or her spouse.

A 2001 law phased in a series of changes in the tax. In 2007 and 2008, a tax of up to 45 percent will be levied on estates over $2 million. In 2009, the threshold will rise to $3.5 million. In 2010, the tax will be lifted completely for a year, but reinstated in 2011 at up to 55 percent on estates larger than $1 million. The act also increases the exclusion amount and decreases the maximum estate tax rate in increments until its repeal in 2010. In 2011, the federal estate tax is reinstated.

The act does not repeal the federal gift tax, however. Beginning Jan. 1, 2002, the gift tax exemption, which mirrored the estate tax exemption, will be increased to $1 million and gift tax exemption, which mirrored the estate tax exemption, will be increased to $1 million and the gift tax rate will be identical to the estate tax rate. After Dec. 31, 2009, the maximum gift tax rate will be 35 percent under the act.

"Under this provision I think it's safe to say that both (political) parties may suffer," Cranston said. "The rules will be difficult and it might be hard to tinker with them. In the abstract, a lot of planners want predictability, but it will be difficult.

Cranston has practiced law in San Diego since 1966. He graduated from San Diego High School and, after a short stint at Rohr Industries, decided that the law was the way to go.

"My father, John M. Cranston, was a very well-respected attorney and he really enjoyed the profession, so I figured I would give it a go," he said. "I found I loved practicing law because it's not only a great profession, but it gave me the chance to be creative as well as independent and I really am able to help people and make a difference."

DLA Piper is a San Diego firm with more than 3,200 lawyers in 63 offices in 24 countries. The firm's clients include local, national and global companies across a wide range of sectors, from emerging businesses to some of the leading national and multinational companies.

Cranston suggests that his clients take the time to develop a life plan and an estate plan while they still have control over the process. The costs associated with properly preparing the legal documents is relatively small compared to the costs of litigation that may occur if the documents are not in line with the law.

"I encourage everyone to find an expert on estate planning, not just a general practitioner,' he said. "Get started sooner than later because it can be a frustrating time in your life."

After he consults with a client, Cranston usually writes up the plan and then urges the family to execute it. That, he says, is where the trouble often begins.

"It's important to remember that children have their own histories with each other and they are going to feel very emotional," he said. "Often families carry baggage for years and they bring it to the table, but if this isn't done properly, it will cause an even greater cost and suffering in the long run."

Reed is a San Diego-based freelance writer.

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