Picture Perfect Planning: One Example of Estate Planning Done Right


Recently, a client of mine died.  His wife had passed earlier this year.  This gentleman and his wife became my clients in 2009.  They were in their late 80s and their goals were to protect their assets from estate taxes, shield their assets if they went into a nursing home, and they wanted to make it easier during life and after death to manage their assets and eventually pass them on to their daughters.

We created two irrevocable trusts, with both daughters as Co-Trustees.  The irrevocable trusts were designed to minimize estate taxes and hopefully shield the assets if either or both went into a nursing home.  The clients moved their single investment account to these irrevocable trusts, and made their daughters power of attorney over their checking accounts and designated that these checking accounts would be paid on death to their daughters.

This week the daughters spent one hour with me discussing what needed to be done:  They had to pay final bills, file a final income tax return and divide the assets equally between them.  They had to cancel pensions and credit cards.  They had to apply to obtain some life insurance benefits.  Except for having to wait until early next year to file the income tax return, they could do all of this within 30 to 45 days, without my help.  In other words, there are no court costs, no probate process, no bonds, no newspaper notice, no legal fees, no estate taxes, no hassle, and they were able to help their parents in the last years of their lives with managing their financial affairs.

If their parents had not come to me, there would have been estate taxes of approximately $50,000 (they lived in a state that had a state estate exemption of 1 million dollars), there would have been a probate process which would have taken 6 to 9 months, there would have been extra income tax return filings, there would have been court, bond and newspaper notice costs, and generally it would have been a hassle, much more paperwork, and more expensive.

The daughters thanked me for the planning that had been done.  I was glad that it has worked so well.  Instead of paying me, the court and estate taxes, they have more money for their own futures.  It was a job well done and well worth the cost to do the planning.

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