Today I want to spend a little bit of time talking about the biggest risk, as I see it, to most estate plans.
When I am speaking with families, CPAs, financial advisors, and others who have questions about estate planning, the topic of tax avoidance becomes the most important part of any estate planning discussion.
But is it?
As I discuss with families time and time again, the answer is a resounding no!
The biggest risk to your estate is, and always have been, family arguments.
First, an estate tax background.
Presently, your estate needs to be valued at $11.2 million (or $22.4 million for married couples) before any estate tax will be due. Less than 1% of Americans today are at risk of having an estate tax due when they die.
However, several years ago, this wasn’t the case. In fact, at one time in early 2000s, the estate tax applied to any estate above $600,000 in value. When you add up your home, financial accounts, and life insurance, this affected a lot more families than it does today.
In addition, income tax can still affect your estate when families fail to plan to preserve the cost-basis step up that is available for married couples.
However, the most significant risk is family arguments. In fact, I recently read about a case where a $1 million estate was reduced to just $400,000 over 10 years of litigation due to arguments and disagreements among the family members.
Every family is at risk to a family argument to reduce the size of an estate. Perhaps an adult child who feels they are not being treated fairly, perhaps because of unequal division of the assets at death, or even when an adult child is not chosen as executor or successor trustee over another adult child.
Any of these issues can cause problems which may reduce the size of your estate.
However, blended families tend to have a more significant risk of these type of problems.
Blended families have unique issues that must be delicately managed. For instance, when you have children from prior marriages, there needs to be careful planning to ensure that the children of the first to die spouse are not accidentally disinherited (This is more common than you might think).
Easy ways to prevent this include periodic reviews of your estate plan with your family and your estate attorney.
If you do not have a relationship with your estate attorney, now is the time to develop a relationship with an estate attorney who will be able to guide and counsel your family as the law changes, as your circumstances change, and during the estate settlement process when your family needs that legal counseling the most.
You spent a lifetime accumulating your assets, why not spend a few weeks with us putting a plan in place to protect your assets and your cherished loved ones.
Give us a call or click the link below to schedule your estate planning and asset protection legal strategy!