Top Ten Estate Planning Mistakes

From The California Tax Attorney Blog come the Top Ten Estate Planning Mistakes and its a great list:

1. Failure to Make Gifts to Reduce Estate Taxes. Easy gifting options include the $12,000 annual exclusion, $1,000,000 lifetime gift exemption, and unlimited tuition/medical gifts. In a 45% estate tax bracket, each $12,000 gift saves $5,400 in estate tax.

2. Failing to Protect a Child’s Inheritance. A child’s inheritance that passes outright to the child is not protected from creditors, divorce, or estate tax at the child’s death. To protect the inheritance, it may be better to leave assets in trust for such child’s benefit. If desired, the child can be named as the co-trustee of the trust along with a third party.

3. Failure to Pursue Sophisticated Estate Planning Tools. Explore techniques to reduce estate taxes and/or protect assets. Consider the family limited partnership, charitable trusts, qualified personal residence trust, and sale of assets to children.

4. Wasting $2,000,000 Exemption When First Spouse Dies. The $2,000,000 exemption is wasted when assets are left outright to the surviving spouse. Instead, the Will should create a bypass trust to be funded with $2,000,000 of the decedent’s assets, saving up to $900,000 of estate taxes (assuming a 45% estate tax rate). WARNING: Naming the spouse as beneficiary of life insurance/retirement plans prevents such assets from going into the bypass trust. Also, if the house goes outright to the survivor, the decedent’s portion cannot be used if needed to fully fund the bypass trust. The impact on the overall plan should be considered before making such a bequest.

Continue reading the original post here. Thanks Mitchell!

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