When it comes to estate planning, there are four critical factors to consider with your clients.
Of the four, says David Frisch, a fee-only advisor with offices in New York and Florida, ensuring that the will is flexible is the most important.
Changes in federal estate laws have raised the amount of what can be passed on tax-free to $5.25 million per individual or $10.5 million per couple, and the value of most estates fall well under those limits. But Frisch points out that state exemptions may be considerably lower, snaring far more people. In New York, for instance, anything over $1 million is taxable at a rate of roughly 15%.
To sidestep the state tax, Frisch recommends that clients insert a provision into their wills that allows the surviving spouse to disclaim a portion of the assets. So, for example, with a $3 million estate the survivor has the option of accepting $2 million and putting the remaining $1 million into a trust, thus shielding the money from “New York’s death taxes,” as Frisch puts it.
This arrangement gives the surviving spouse maximum flexibility, since he or she can determine what portion of the estate to put into the trust. By taking direct control over some of the money, but not all, the survivor avoids becoming wholly dependent on the trustee, who may or may not be accommodating to the survivor’s needs. Also, Frisch says, other clauses can be inserted into the will that permit the survivor to tap the income from the trust.
The second factor to consider, Frisch says, is special provisions for children and other beneficiaries for whom the client can’t or doesn’t wish to give outright control of their estate. Requirements of this sort are much more prevalent today than they were 20 years ago, Frisch observes, and may include children with Downs Syndrome, autism and drug addictions, among other possibilities.
A third factor is the titling of the estate’s assets. Specifically, Frisch says, clients may need to equalize the assets by placing the house in one spouse’s name and the IRA in the other’s—in order to utilize the state tax exemptions effectively. If there are no assets in the husband’s name, for example, because he was a doctor and put all his assets in his spouse’s name to avoid liability claims, then his spouse would not be able to take advantage of New York’s $1 million exemption.
The fourth factor is beneficiary designations for retirement accounts. Without a named beneficiary, Frisch points out, the account will be passed on as part of the estate, and there is the possibility that the entire account will have to be liquidated and all the taxes will be paid at once. That could push the estate taxes into a tax higher bracket, and the account beneficiary will lose the power of the deferral going forward.
Failure to alert clients of this possibility has led to lawsuits against financial advisors, Frisch warns.

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