Broker Check


Is Your Estate Plan in Good Health?

| October 22, 2018

Last week we talked about the tremendous opportunity current Tax Reform has created for cleaning up your financial, retirement, estate, and tax messes. And one of the most reoccurring messes we are seeing is within estate plans.

Remember the 2000s? It wasn’t that long ago, but in the estate tax world it is almost as if we are living in a different era. In 2001, the federal estate tax exemption – which is the amount you could pass to you heirs free of estate tax - was $675,000. Today that number is $11,180,000.

So what’s the problem? It’s better! There shouldn’t be a problem, right? Wrong! There are actually several problems. Let’s look at a few of them:

First off, nothing is permanent in Washington. Even when they declare it is permanent, it changes with every Presidency. So what do you think it means when something isn’t permanent in Washington? Well, herein lies the estate tax exemption amount. Hillary Clinton ran on the notion she would make the exemption $3,500,000. That is a long fall from the eleven some odd million it is today. So if I were you and had more than $3,500,000 in assets, I would suggest some serious planning—NOW. Remember what we talked about last week regarding that nasty word “clawback”? It applies here. 2018 is your golden ticket if you want to make sure your heirs don’t pay forty plus percent in estate taxes!

Second, if your will was written in the 2000s or earlier, you may have some unintentional, very expensive surprises waiting for your heirs and even your spouse. Back then, attorneys commonly set up a trust inside your will to push out assets at the first death in the amount of the exemption. This would allow the surviving spouse to use their exemption in addition to yours, but still be able to use these assets as he or she needed for the remainder of their lifetime. Why would this be an issue? Well, whether you need it or not, you will get it. Attorneys had no choice but to set up this trust. It’s costly, time-consuming, stressful, and useless. So unless you want your spouse or kids to be cursing you after you’re gone, you might want someone to look at it.

Third, do you have an Irrevocable Life Insurance Trust that was supposed to pay your estate taxes when you died? You may not need it anymore. It’s costly and time consuming. Plus, there might be better things you can do with this. What if you could use it or simply get more to your kids?

Fourth, even though Uncle Sam is generous right now, it doesn’t mean your home state is. In fact, there is a trend starting. The way some of the states are looking at the new exemption amount is that it creates opportunity for them to pick up what Uncle Sam was giving up. Yup! That’s true. States are lowering their exemption amounts, raising inheritance taxes, and flat out taxing you more. How else are they going to pay off their debt?

And last but not least, let’s talk trusts. Oh, trusts. There once was the Model T…you could get it in black or black. Now…you get the point. Trusts are beyond complicated. They can wreak havoc equally as much as they can help if they weren’t (or aren’t) drawn up correctly. If you are the grantor, trustee or beneficiary of one you probably know what I’m talking about. If you don’t know what I am talking about, you will. The IRS and attorneys of beneficiaries have had a field day creating stress for all parties involved. The problem is when you need a trust, you really need a trust. This is why we make it our business to keep some of the nation’s finest attorneys, CPAs, and tax attorneys at our finger tips to review them.

Everyone wants the same thing—good Christmases and Thanksgivings. Everyone wants to pay no more than their fair share to Uncle Sam. This is what we do. Let us be vessel to help get your estate plan to good health in 2018 before it is too late.