Estate or death planning: There’s no better time than now


The recent fiscal cliff tax legislation (American Taxpayer Relief Act) made the estate tax exemption and rates permanently part of the tax code. The lifetime estate and gift tax exemption is currently more than $5M for an estate. For many individuals, this level of exemption eliminates a potential tax issue that they or their heirs need to deal with.

Unfortunately, this change may provide a false sense of security, and many individuals may ignore the need for any estate and death planning. That planning is still very important, even with the recent changes.

Recently, we saw Robin Roberts return to work on ABC’s “Good Morning America” after her recovery from a bone marrow transplant. Seeing the “20/20” special on her journey brought back keen memories of my own bone marrow transplant and recovery more than 10 years ago. Roberts is just a few days older than I am and had a similar blood disorder. In fact, we were both given the same prognosis when the condition was identified: If we didn’t undergo a bone marrow transplant, we likely had less than two years until our premature deaths.

When I went through my journey in 2002, I was a new father of multiples with a wife who was caring for them. The possibility of me not being there for all was incentive for me to push as hard as I could to make it through the chemotherapy, the transplant, and the ups and downs of the post-transplant recovery. At the same time, I determined I needed to make sure I could, to the extent it was in my control, make decisions and have conversations of what my wishes and desires were for my family in case the transplant wasn’t successful. This meant updating my estate plan and related documents.

We often think that estate or death planning is for those with a lot of assets and taxable estates. The planning process may be just as important for non-tax purposes for those without taxable estates. Without proper planning, a simple estate can become very complex if it needs to be processed as a probate estate under the jurisdiction of the probate court. This can add time and costs to the process.

In addition to the administration of an estate and its assets, there are the more important issues that need to be considered during lifetime and not left to a court after death. This can include the need to determine guardianship of children, how assets are legally held and administered after death, and who should possess certain powers and responsibilities in the untimely event of one’s death. These items really are not an option; they are a necessity.

Given my profession, I had the benefit of knowing many of the items that needed to be included in the updating of my estate plan. In 2002, I took some time to make a list of a number of items, from an inventory of assets to whom I wanted as successor trustees of any trust set up as part of the plan in the event my wife needed help or she herself passed way. Decision-making responsibilities included in a medical durable power of attorney also need to be considered for many of us. None of these topics are easy to think about.

Because of my particular situation, I was forced into having to act in a very urgent manner. Making such decisions in a stress-filled environment is not ideal. Making them in a more peaceful time makes the process a bit more deliberate rather than reactive.

Getting one’s house in order is important. This includes the identification of assets. It can be difficult to identify all relevant assets. The easy ones are the house and cash in a checking or savings account. It’s identifying and tracking down other assets, such as retirement plans, life insurance and other less obvious assets that can take some effort. Then, having your spouse or family know where the information is maintained or stored is very important.

A friend of mine makes the effort each year (typically at tax return time) to scan all his family’s key documents and store them on a compact disc. This includes yearend statements, life insurance policies, house documents, tax returns and other documents. He then places the CD in a safe deposit box so he and his wife have everything in one place. My own personal version in 2002 was not 21st century by any means. It was not a CD, but rather a yellow plastic milk crate filled with all the applicable information in manila file folders ready for access for my wife when I was in Chicago undergoing my bone marrow transplant.

The entire planning process can include some smaller, yet important, action items. These actions include updating beneficiary elections for retirement accounts and life insurance policies. Taking time to confirm how specific assets are actually titled is another necessary task. How assets are titled can impact how the assets may pass on to beneficiaries in the future. For many of us, this process likely has not been performed for several years, if at all. Professional advisers can assist with questions and some of the technical details.

It is human nature to delay making decisions regarding death and its aftermath. Unfortunately, we often make those decisions, if we make them at all, in a stress-filled crisis environment. All of us should be making these decisions in a more deliberate and controlled environment.

The recent attention paid to the estate tax provisions may provide an opportunity to focus on some pre- and post-death planning. Perhaps a resolution for all of us this year to take some down time and fine tune our existing plans or create a new plan will be time well spent. The impact of such plans can affect many of the closest people in our lives. One may not get the benefit of a second chance to do this later.

Bill Roth is a tax partner with the local office of BDO USA LLP. The views expressed are those of the author and are not necessarily of BDO. The comments are not to be considered specific tax or accounting advice. Readers are advised to consult with their professional advisers before acting on any items discussed.

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