Estate Planning when you have Significant Assets, in Kansas City, Missouri.

There are folks out there who have estates, or will have estates, that are of fairly significant value.  When I’m talking about estates I mean houses, cars, business real estate, a small business, investments, 401(k)’s, IRA’s, and anything else you can think of.  And when I mean significant I mean more than the current Federal Estate Tax.  While this might not be helpful in the future, I’ll tell you the 2017 Federal Estate Tax; $5.49 million for an individual and $10.98 million for a married couple.

To some of my readers, that is going to seem like a crazy amount of money.  To others, it will seem like a concern because they didn’t really think about the fact that their small business might be valued at a pretty significant price.  I think many people are surprised at how quickly you might approach those figures.  This can be especially true for farmers or anyone who has significant amounts of real estate.

Regardless of whether or not you are in the category of someone who has significant assets, you probably would like to be and you might find some of this information very interesting.

How Married People Can Still Get Hit by the Individual Rate

This is one of the primary concerns out there for people that have significant assets.  Maybe you don’t have an eleven million-dollar estate, but maybe you do have a small business that is valued at a couple million, you and your spouse have a little over a million in retirement savings, you just inherited your mom’s house and yours is worth a few hundred thousand. 

Well, with that kind of a scenario you could easily be over the $5.49 million level.  Of course, you are married so how could being over the $5.49 million level matter?  Well, maybe it’s obvious, but people don’t typically die in pairs.  So, when the first spouse passes away and a few years pass, now you are an individual who has exceeded the individual amount.  We call this a snowball effect.

One spouse passes, the family business is still in your hands, the investments increase in value, and all of the sudden you are in the category of “the rich,” but you don’t feel rich and you don’t want the business to be sold when you die.

How a Married Couple Can Avoid those Costs

To make the most of the spouses unified credits (the thing that lets you avoid those estate taxes) you probably need to have some fairly simple planning tools put in place.  This would include using a trust, retitling some property in a way that passes significant portions into a trust.  This is a “credit shelter” or a “bypass” trust.  This allows whoever the surviving spouse is to get the most out of the unified credit.

These methods are beneficial mostly for clients who are over the individual threshold but under the married couple’s threshold.


Financial Consideration, Investments, and What You want to Protect

An important element of planning for a trust like this is taking into consideration that the assets you identified are likely to increase in value (at least we hope they do).  This is where working with a financial adviser and an estate planning attorney is going to be necessary.  This is because you may not want, or need, to transfer all your assets into the bypass trust, that will very much depend on your family circumstances.  If the assets that you have identified are low or slow growth, then it might not maximize your benefit versus assets that are a higher growth potential.

Part of my personal experience with this comes from my time as a Financial Adviser.  I worked with people who were developing their investments, and were planning for future growth.  If you, or your estate planner, isn’t well versed in investment planning it can be difficult to develop the comprehensive plan that you likely need.

It is also important to consider that while you might not be at the estate tax threshold right now, you might be if you continue to make wise investments.  If you plan for these concerns early, you might be able to save yourself a lot of trouble later.  And you might want to consider that if something unfortunate happens to you when you are younger, your spouse might not have the option to get this kind of protection later.

If there is anything else I can do for you, please don’t hesitate to let me know.

Thanks for reading!

Good luck out there.

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