Estate planning: better done sooner rather than later


The new year is off and running at full speed. I often comment about taxes in some fashion. This month, I am going to take a break from being in the weeds on taxes and spend some time on a topic that probably has application to many, if not all of us.

In recent weeks, I have had several friends lose a family member, often a parent. Often the death is expected. In many instances, it is still unexpected. In recent years, I also have had friends that have passed away, and I have helped their spouses deal with many items after the dust settles.

Estate planning has been a popular topic for most of the years in my professional career. This planning was performed to structure one’s financial affairs before and after death in order to best provide for heirs and to minimize any death taxes. Many of our readers may recall when the estate tax applied to estates in excess of $600,000 (just over 20 years ago). That threshold captured many middle-class families that may have had a house, insurance, a modest investment portfolio and some retirement assets. With many versions of tax reform over the past 20 years, that estate tax exemption has grown to more than $11 million in 2018. If one is married, this can result in more than $22 million in the assets of a husband and wife that can be transferred during life or at death with no actual federal estate or gift tax liability. The change in the exemption alone probably has resulted in many individuals not being as diligent in updating or implementing an estate plan.

However, an estate plan is more than just managing the estate tax liability and creating trusts or other vehicles to hold assets during life or death. It can be viewed in a broader context. There are other items that need to be considered with any planning that involves life and death. Unfortunately, we often procrastinate making such decisions since it is not the most comfortable topic to deal with.

Because there is more to an estate plan than just dividing up assets among heirs, I thought I would take some time to walk through some items I have seen others consider in their own journey on this topic.

Thinking about charity is often a theme for many in their end-of-life planning. I have seen many friends and colleagues reach a point when death is not far away and decide that perhaps leaving something behind to make a difference or impact others is something that is important. Perhaps, it is leaving a legacy that can impact others that are not as blessed with the same assets, income or opportunities. The intent or hope is that others can be impacted in a positive way with some assistance. Many of us had someone or something that may have made a difference in our own lives. Many look at doing something before death as one way to pay it forward. Estate and income tax professionals can assist in how to best structure any charitable gift or bequest.

Another area that often requires some attention is planning one’s funeral. Often, the planning is left to children and grandchildren with no clear direction by the deceased. There has been a trend among some to start to plan their funeral during life. This may involve the design of any funeral service with a selection of songs, readings and identification of which of their loved ones they want participating in any funeral service. These items sound rather simple, but making some decisions when all is going well will assist those left behind in dealing with all the to-dos that come with a death event. The decisions around burial plots, caskets, cremation, etc., can be made during one’s lifetime rather than burdening loved ones at the time of death.

And then there are the practical items. Where are financial and other key documents located? This may include real estate records, wills and trust documents, bank and financial accounts, retirement accounts, automobile titles, life insurance policies, etc. These records are the start of the documents that need to be gathered up along the way after a death. I have a friend who scans such documents each year and has a file available on a thumb drive. Access to these records can assist one’s family during the estate administration process. Transfers and name changes can take time to execute after a death and having a full complement of all the applicable records can make a big difference in helping get things done for your personal representative and heirs.

There also are decisions about the assets that aren’t necessarily in the bank or a brokers account. Those assets often are of items of family history and heirlooms. The old china, that crystal in a cabinet, jewelry, books, furniture and collectibles. I have seen many individuals actually work with children and grandchildren during life to identify and designate which items should go to which heir by making a list and assigning names, or asking children or grandchildren to indicate their particular interest in items. It actually saves time and stress for all if this type of process occurs.

Another key decision is the identification of who should be a personal representative or trustee of one’s estate. This can require some forethought. Much responsibility comes with the job along with a lot of unforeseen, little things that come up and need to be handled. In many ways, it can be a thankless job and one needs to select the appropriate person to take on this task.  

Much of what I have discussed above isn’t rocket science, but rather common sense. As Benjamin Franklin was quoted as saying: Nothing is certain in life but death and taxes. Planning to make the certainty less painful in many ways for loved ones can be beneficial in so many ways. Working with the appropriate professionals can make this process a positive experience for all involved.

William Roth is a tax partner with the local office of international accounting firm BDO USA LLP.

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