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  • Milad Taghehchian, CPA, CFP(R)

Millionaire Families Failing to Plan Estates

A recent CNBC survey discovered that more than 1/3 of millionaire families, defined as those with investable assets over $1 million, have not established an estate plan with a proper financial expert.

Why? Perhaps the constant changes to federal estate-tax law have continued to confuse families, as they can’t keep up with the ever-changing law. Some families simply think they don’t need to establish a plan, as the latest exemption stands at $5.43 million per person – in other words, no taxes are paid for estates under $5.43 million. However, this is not a good excuse for not devising an estate plan. Why leave so much uncertainty to your children and family, especially with so much money at stake? A quick cautionary note – some states, like New York and Maryland, levy their own estate taxes that kick in much earlier than at the federal level. Maryland’s deduction, for example, only applies to the first million. Importance of Estates Many of these people perhaps dismiss the importance of estates. Tax breaks and estate transfers are only a portion of the equation. Your estate documents protect your other assets, like property, and even include end-of-life decisions. Without these instructions, you can leave your family in an uncomfortable position when it comes to sudden decision-making. With young children comes the necessity of a will. Money isn’t the most important factor

here – in an unfortunate turn of events, your children may need a guardian to take care of them through adulthood. As for the money, you can set up trusts and name a trustee to handle it until the children reach a specific age. Consequences of Improper Estate Planning In the case of a tragedy, the courts would be left to make decisions that you could’ve made when planning your estate. One of these, perhaps the most important, is who gets to take care of your children. A medical power of attorney is important too, giving an individual authority to make health-care decisions in your place when you can’t. Similarly, a financial power of attorney document identifies who handles your money and finances in a situation when you can’t. This grants legal authority to act as a financial extension of you, paying down your taxes, debts, handle bank transactions, etc. Tax burdens must also be considered. In some cases, it makes sense to leave money to your heirs in trusts. But in others, they end up paying high income taxes and would instead benefit from being given the property directly rather than through a trust. "He who fails to plan is planning to fail." – Benjamin Franklin By taking the time to establish a clear plan in your estate, you won’t have to worry about what can happen to your family in the worst-case scenario. Your heirs will have a clear understanding of who gets what portion of the estate, and your children will be taken care of by a legal guardian of your choice. After all, you’d prefer to make these decisions now rather than have the courts make them later – without your approval!

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