Leaving a Legacy: Tax and Estate Planning

08/31/2019 - Wealth
Financial Planning

There’s an assumption among the general public that, upon attaining a certain level of wealth (don’t ask me for numbers, because no one seems to know), they and their progeny are what is popularly referred to as “set for life.” 

Hogwash. If anything, wealthy people are more susceptible to losing substantial portions of their assets specifically because of their wealth. 

As one accumulates assets over time, the titling (ownership) of those assets is like an insect in amber—locked in, based on the letter of the law. This fact makes comprehensive tax and estate planning by qualified professionals essential for protecting one’s wealth, and for ensuring their ability to leave behind an estate, a legacy for future generations. 

Many married couples have joint accounts with rights of survivorship, set up with capital well below the federal estate tax exemption limit (known as the unified credit). Over time, however, that capital can appreciate sufficiently to exceed the limit. It’s an easy-to-overlook detail, a problem waiting to happen—especially for those trying to self-manage their tax and estate planning. 

In my book, You’re Retired. Now What? I share the story of a man who named his second wife as beneficiary on his IRA, after she promised to name his children (from his his first marriage) as her beneficiaries—the recipients of the remaining funds—upon her demise. But his children would learn the hard way that blood is thicker than water. 

After their dad passed, their stepmom changed the beneficiaries to her relatives, on what was now, by law, her IRA. The people whose futures the man had worked all his life to help secure received none of their father’s IRA funds. Oops.

I’ve seen enough in my 30-plus years in this industry to help clients avoid situations like these. Sadly, they happen all the time, and they don’t have to. In this case, a trust would have been my recommendation, and I’d have referred this man to an estate planning attorney to assure it was set up properly. 

Might it have caused friction between the couple? Indeed it may have. But if he’d explored setting up a trust and the stepmom protested, the man would have learned something important about her “investment” in the relationship. Painful as that might have been for a month or two, it may well have preserved the wealth he’d worked for, and assured that his kids received it.



This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy or sell securities, and is not provided in a fiduciary capacity.

This blog does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors. It is important to review investment objectives, risk tolerance, liquidity needs, tax consequences and any other considerations before choosing an investment style or manager.

This material contains forward-looking statements, predictions and forecasts (“forward-looking statements”) concerning our beliefs and opinions in respect of the future. Forward-looking statements necessarily involve risks and uncertainties, and undue reliance should not be placed on them. There can be no assurance that forward-looking statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements.

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