Issues With Estate Planning

It is critical for your attorney, your CPA and your financial advisor to work closely together to protect you and your assets while you’re still alive. It is imperative that they work together to protect your heirs and your estate after you’re gone. Otherwise, your next heir may very well be Uncle Sam.
  1. Issues with no estate plan: If your estate plan is not set up, who gets what depends on whether or not you have living children, parents, or other close relatives when you die depends on the intestate succession law.
  2. Issues with Trust: There are many forms of trusts but it boils down to 2 types:
    1. Revocable Trust: Under this trust, you can change your mind (to revoke the trust) and take back your assets any time you want. Unfortunately, if you were sued, your creditors can ask the judge to order you to revoke your trust to bring back the assets and hand them over to your creditors.
    2. Irrevocable Trust: Under this trust, you cannot change your mind. Once you have given it away, you cannot take it back. Unfortunately, if your beneficiaries were sued, your creditors can ask the judge to order them to hand the assets over to their creditors.
  3. Issues with Trustees: Unfortunately, many trustees lack the skills required to oversee a trust. People who establish trusts typically first look to a friend or family member to serve as trustee. However, friends and family members often have little knowledge of the issues surrounding the prudent management of a trust, especially if it involves a business or a life insurance policy. The other popular choice is a trusted advisor such as a financial advisor, accountant or lawyer. However, similar to a friend or family member, there is no guarantee that the trusted advisor is versed on the items necessary to effectively oversee a business or a life insurance. Various court cases confirm that whether the trustees are friends, family members or professionals, they are often not living up to their fiduciary responsibility.
  4. Issues with Taxes: A topic that is not often discussed is that the IRS may be the beneficiary of your estate. That’s because many estate plans do not properly account for estate tax.
    1. You must die the right way: You must leave this world in a way that is specifically allowed in your life insurance policy.
    2. You must die at the right time: Approximately $5 million of your estate (that includes your life insurance proceeds) is exempt from estate tax until 2016. Therefore, in order to make use of this $5 million exemption, you must die before 12/31/2016.
    3. You must pay file and pay taxes in time (even after you’re dead): Generally, the estate tax return is due nine months after the date of death. A six month extension is available if requested prior to the due date and the estimated correct amount of tax is paid before the due date. While that seems like ample time, it is not when there are disputes among their heirs, the valuation and sale of the estate, and of course, the estate tax. If not, the taxman can seize your entire estate and auction it off for a fraction of its value… and yet your heirs may still owe the taxes.
  5. Issues with heirs: It is critical for your attorney, your CPA and your financial advisor to work closely together to guide your heirs (who are younger and less experienced than you) and to promote, if not ensure peaceful cooperation among each other.
  6. ISSUES WITH TIMING: How you plan today can affect the size of Uncle Sam’s take after your death. Make the wrong move, and the tax collector could take up to 90% of your estate. Call your attorney, your CPA and your financial advisor to protect yourself and your family TODAY.

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