Today, your estate may be well below the federal gift and estate tax exemption of $5.43 million (double that for married couples). However, if your wealth grows over the next 30+ years, or Congress makes changes to that amount, you may end up with a large estate tax problem. So how do we plan for that now and what other issues need to be discussed?

1.    Its all about that Basis. Yes, it sounds like a popular song, but basis in the Estate Planning arena is something to always be considered. If you transfer an asset upon death, the tax basis is “stepped up” to the current fair market value allowing the beneficiaries to sell assets without recognizing capital gains. However, some people will attempt to transfer the asset as a gift – when that is done, the basis does not get stepped up and when the asset is sold, there may be a huge capital gains issue.

2.    Flexibility in Planning. A well drafted Living Trust will give flexibility to the Trustee who will have the ability to make changes based upon his/her family’s situation.

3.    Look to the Future.  It is best to look to the future as you plan your estate.  A well drafted Living Trust will not only look to the here and now, but will take into account changes in the family (people) changes in the family’s finances and possible changes in the law. 

4.    Plan Now.  I often hear young families say, “We can set up our Living Trust later, when the kids are older.”  The problem is that they are making a huge assumption that life won’t throw then a curveball.   The second problem is that planning now not only deals with the death of the Trustors, but we also deal with documents that are needed now, while the Trustors are living – the following (besides the Living Trust) should be included in an Estate Plan:

        - Advance Health Care Directive

        - Power of Attorney for Assets

        - Nomination of Conservator

        - Nomination of Guardian

        - Pour-Over Will

        * In another article, I will go over all of those important documents.

The greatest advice for young families is to “bite the bullet” and plan NOW so that you are ready for those curveballs and so that your family and the estate you are building is protected.


July 2015 by Donald W. Flaig, Esq.