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Estate Planning Protects against Costs, Taxes and Creditors


Estate PlanningEveryone has an estate plan for their property— either intentionally, or by default. Each state has rules for where property goes upon a person’s death if he or she has not created a written plan. But a written plan can provide for more individual needs and decrease taxes and costs.

Estate planning involves arranging your property to make it easier to manage and distribute during your lifetime and upon your death, and to protect your property from administrative costs, taxes and creditors to the extent possible.

The Small Estate — Proportionately Higher Savings

“But I don’t have a lot of money, so do I need to do planning?”

Yes. For smaller estates, the planning focus is on reducing administration expenses.

To reduce expenses during your lifetime, you should have a financial power of attorney, and a health care power of attorney/advance directive. Otherwise, if you are unable to make decisions for yourself, a guardianship or conservatorship court procedure will be necessary to manage your property and make health care decisions for you.

To reduce costs for distribution upon death, make sure you have no assets that pass through probate. This can be accomplished with retitling such as joint tenancy, transfer on death and pay on death, and proper beneficiary designations for retirement accounts and life insurance and annuity products. Administration costs at death can be a high percentage of a small estate.

Example: A recent estate we worked on had only an automobile, a stock account and a bank account. The value of these assets totaled less than $15,000, but the costs and fees for administering even this small estate procedure was more than $1,800.

The Very Large Estate — Tax Planning Pays Off

“I have done all of the estate planning I need to do. I have a revocable trust, and have even given away $5 million to my children; but my lawyer tells me that I will still have a very large estate tax. Is there any way I can reduce that estate tax with further planning?”

Yes. There are a number of recognized ways to reduce your estate and your estate tax costs legitimately. These include planning with sales, leveraged gifts, partnerships and charitable giving.

Example: A very large client approached us about reducing estate taxes. By selling certain assets to a trust for the family, the client was able to create an estate tax savings of $2.5 million immediately and, over an additional eight- to 10-year period, another $7 million in savings.

The Estate in the Middle – Tax Planning Still Pays Off

“A married couple can pass an estate worth over $10.6 million without any estate tax. So do I need to do complicated tax planning if I don’t have that much?”

Yes. Significant tax-saving results can be achieved for estates of between $4 million and $15 million.

First, to qualify for two $5.3 million exemptions, a couple must carefully plan. Improper planning could subject an estate which would otherwise bear no tax to a tax of $2 million or more when the survivor dies. Some simple planning can eliminate that risk and even allow for appreciation in the value of the estate without tax.

Second, with some advance planning, taxes on amounts over the $10.6 million combined estate can be achieved. Some relatively simple planning includes transferring life insurance policies, which have relatively low value during lifetime and a big impact on estate taxes, reorganizing assets so that growth occurs out of the taxable estate, or selling assets to freeze the current value.

 David P. Heilich, CPAFill out the adjacent form to schedule a meeting with Dave Heilich, Partner in Charge, Family Wealth Planning and further discuss your estate planning needs.


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