Estate Planning Tips – Part II

Kimberly Hegwood
Kimberly Hegwood

Yesterday, I started a 2 part series on Estate Planning Tips for people who have been able to accumulate more than $5,000,000.  Today is the second part.

I generally work with people who have less than $500,000 in savings.  There are just too many ways for me to screw up when I give advice to people who need true estate planning.  I bow to the education and expertise of those who deal with this type of planning on a regular basis.

If you have questions about how Life or Health insurance works, use the form to the left to ask me.

However, I only “know enough to be dangerous” about Estate Planning.  If you feel that you need to have a full estate plan, do not rely on just an insurance agent.  We insurance agents are just a minor player on your Estate Planning team.  Your Estate Planning attorney should know the laws in your state and be able to write the Trusts that you need.

If you live in Texas, most law firms that specialize in Estate Planning should be able to help you.  I have no problems endorsing the author of this series.  Her offices are in southern Harris County.  Visit her web site at,

If you live in a state other than Texas and have been able to accumulate a sizable estate, I encourage you to contact an Estate Planning attorney in your area.  I am no lawyer but I know enough about Estate Planning to know that what is sufficient for a resident of Texas may not be sufficient in a different state.

The Need for Proper Planning Remains
For most Americans, this tax legislation has removed the emphasis on estate tax planning and put the emphasis back on the real reasons they should do estate planning: taking care of themselves and their families. Proper estate planning is essential to:

* Avoid state inheritance/death taxes that have lower exemptions than federal taxes;

* Avoid probate, which can be quite expensive and time consuming in some states;

* Ensure assets are distributed the way the client wants;

* Protect an inheritance from irresponsible spending, from a child’s creditors and from being part of a child’s divorce proceedings;

* Provide for a loved one with special needs without losing valuable government benefits;

* See that control of the client’s assets remains in the hands of the person they trust most;

* Provide responsibly for minor children or grandchildren;

* Help protect assets from creditors and frivolous lawsuits (especially important for professionals);

* Protect the client, their family and the client’s assets in the event of your incapacity;

* Establish business succession planning at retirement, incapacity and/or death; or

* Help create meaningful charitable gifts.

For Those with Larger Estates
Ample opportunities remain to transfer large amounts tax-free to future generations. But with the increase in estate and income tax rates, it is critical that professional planning begins as soon as possible.

Planning Tip: Clients do not have to make transfers in cash or liquid assets or completely give away assets. One can transfer illiquid assets like a business, or a home or other real estate, to a trust. If you transfer a home, the owners can continue to live there and take the tax deductions. If a business is transferred, it can be done in such a way that owners can keep control and receive income. By planning now, future appreciation of these assets will not be subject to estate tax, and current depressed values can result in very favorable valuations.

Planning Tip: Clients can leverage their exemption and make it worth much more by using asset value discounts associated with lack of control and lack of liquidity and by using the tax-free growth inside a life insurance policy. Life insurance policy proceeds, when structured properly, can be completely free of probate, and income, gift and estate taxes, and can be protected from beneficiaries’ creditors and predators—even divorce proceedings. Life insurance is also more important than ever because of its income tax benefits, given higher income tax rates.

What to Expect in the Future
With Congress looking for more ways to increase revenue, many reliable estate planning strategies may soon be restricted or eliminated. Already being discussed are minimum terms for grantor retained annuity trusts (GRATs), elimination of valuation discounts for family limited partnerships, limits on installment sales to grantor trusts and other changes to grantor trusts. Other revenue raisers may be proposed that have not yet been widely discussed. Thus, it is beneficial to implement these strategies as soon as possible to increase the likelihood that they will be grandfathered should Congress decide to change the law.

For clients who have been sitting on the sidelines, waiting to see what Congress would do, the wait is over. Now that we have some certainty with “permanent” laws, there is no excuse to postpone planning any longer. In fact, delaying planning could cause your clients to lose out on strategies that could have significant benefit to their families. Encourage your clients to take action today.

To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax adviser based on the taxpayer’s particular circumstances.

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