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ESTATE PLANNING
The Need for Estate
Planning
Financial Burdens
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Probate fees: These are generally paid to the executor of the estate and the attorney who assists with the probate.
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Death taxes: Estates, which exceed certain amounts, may be subject to both state and federal death taxes.
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Liquidity: There are not enough liquid (cash type) assets to pay estate settlement costs.
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Cash flow: There is not enough income to care for loved ones left behind; eg., spouse and minor children.
Transfer of Assets
Estate assets may be subject to probate delays and expense.
Assets transferred to rninors may be in cumbersome guardianship accounts until they attain age 18 (or 21 in some
states) and are then distributed outright to the children.
Care of Minors
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Guardians: Parents can nominate a guardian for their minor children
in a will.
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Asset management: If the wrong persons are chosen to manage the assets left for the minors, the assets may be lost or unnecessarily reduced.
Proper estate planning can eliminate or reduce these problems.
How are Death Taxes Paid?
Death taxes are due and payable in cash within nine months after the taxpayer's
death.
Five Ways to Provide Money for Death Taxes
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The executor may borrow the cash. This only defers the problem, since the
money will have to be repaid with interest. This includes installment payments to the government.
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The taxpayer may pay in cash. Rarely does a person accumulate large
sums of cash. If he or she does, they probably will forego many profitable investment opportunities in order to keep the estate in a liquid position.
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The taxpayer may sell stock market investments. This may be a wise choice if the market is "up" when the stocks and bonds need to be converted to cash and the taxpayer has been investing long enough to have accumulated the necessary amount.
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The executor may liquidate other assets. If there is not a ready market, however, the assets may be sold at a great loss.
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The taxpayer can pay his or her estate settlement costs with life insurance.
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