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Estate planning is a crucial element of wealth management that our firm assists our clients with.  While we don’t get paid to provide and write estate plans, we’re very involved in this process for clients.  After countless meetings, conversations and research, below is a list of the most common mistakes in estate planning.

 

  1. Failure to Create a Bypass Trust When First Spouse Dies:  In past years, the estate tax exemption was wasted when assets were left to the surviving spouse.  But under the current system, the deceased spouse’s unused estate tax exemption can be used by the surviving spouse.
  2. Joint Tenants with Right of Survivorship Account Titling:  This designation is common when opening bank and brokerage accounts, but prevents funds in these accounts from being funded into the bypass trust when the first spouse dies.  This can potentially waste the deceased spouse’s estate tax exemption.  Multiple party accounts should be set up as tenants in common.
  3. Life Insurance Policies Owned by the Insured:  The proceeds of a life insurance policy are subject to estate tax when owned in the name of the insured.  By owning the policy inside of a life insurance trust, the proceeds are tax free to the beneficiaries of the trust and are not counted as an asset of the insured upon death.  Furthermore, assume the trust has 3 beneficiaries and the policy is on the mother.  In this situation, the mother can gift $14K per beneficiary for a total of $42K without using up her lifetime gift exemption.
  4. Leaving Inheritance Directly to a Child:  Leaving inheritance directly to children can leave the funds exposed to lawsuits, divorce settlements and estate tax upon death.  Instead, create a trust which the child can be trustee of to protect against these instances.
  5. Lack of Liquidity to Pay Estate Taxes:  Not enough liquidity can result in the forced sales of real estate, family businesses or other assets to pay estate taxes that are due within 9 months of death.  In these scenarios, life insurance is often used to provide enough liquidity.  But be sure to follow rule #3 when doing this.

For advice related to your situation, please consult your estate tax attorney.  If you do not have one, please contact us and we’ll be happy to make an introduction.

 

 

Proper Wealth Management’s (“Proper”) blog is not an offering for any investment. It represents only the opinions of Jared Toren and Proper . Any views expressed are provided for information purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest. Jared Toren is the CEO of Proper, a Texas based Registered Investment Advisor.   All material presented herein is believed to be reliable but we cannot attest to its accuracy. Opinions expressed in these reports may change without prior notice. Information contained herein is believed to be accurate, but cannot be guaranteed. This material is based on information that is considered to be reliable, but Proper and its related entities make this information available on an “as is” basis and make no warranties, express or implied regarding the accuracy or completeness of the information contained herein, for any particular purpose. Proper will not be liable to you or anyone else for any loss or injury resulting directly or indirectly from the use of the information contained in this newsletter caused in whole or in part by its negligence in compiling, interpreting, reporting or delivering the content in this newsletter.  Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security or financial instrument, nor is it advice or a recommendation to enter into any transaction. The material contained herein is subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Proper may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. Proper Wealth Management is not responsible for any errors or omissions or for results obtained from the use of this information. Nothing contained in this material is intended to constitute legal, tax, securities, financial or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this material should not be acted upon without obtaining specific legal, tax or investment advice from a licensed professional.

Author: Jared Toren

Jared Toren is CEO and Founder at Proper Wealth Management. Proper was born out of frustration with the inherent conflicts of interest at big brokerage firms influencing advisors to sell products that were not suitable for clients but profitable to the firm along with a consistently mixed message of who’s interest was supposed to be put first; the clients’, the firms’, shareholders or advisors.

At Proper, our clients interests come first. We are compensated the same regardless of which investments we utilize so there’s no incentive for us to sell high commission products. Since we focus on a small number of clients, we are able to truly tailor our advice to each person’s unique circumstances.

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