For the People By the People

Strong Estate PlanningA Morbid Necessity

November 2013

For the People By the People

People are usualy eager to develop a budget plan or a tax plan. It makes sense: both of these things are great financial decisions that will ensure that you keep more of your money in the future. There is a se-rious, measurable benefit for engaging in both of them, and the return can be seen almost immediately. However, there is another type of financial planning that is just as neces-sary, but has people cowering away from the conversation about it: Estate Planning.

You’ve probably heard about things like “Estate Sales”, in which a deceased person’s belongings are auctioned or sold off to the next generation of homeowners. Well, an Estate Plan isn’t entirely dissimilar - however, instead of passing down antique candle-sticks and dusty old children’s books, Estate Plans are usually responsi-ble for carrying your more valuable assets to future generations.

Estate Planning Case Studies

Estate plans have been known to go awry in some cases: a Dallas attorney recently wrote about how Bill Davidson had literally billions of his personal estate up for grabs by the IRS due to some desperate, last-minute attempts to preserve the money. In fact, his family is only receiving a fraction of what they could have if Davidson would have invested the time and money into some strong, legal estate plans. This way the IRS has minimal say in what heppens to the money, and the family is free to enjoy the billions and billions of dollars that papa Da-vidson had earned over his incredibly successful carreer.

The odds that you’re going to be dealing with Billions of dollars in wealth is unlikely, but there are plenty of people who are dealing with hundreds of thousands or even millions of dollars that they would like to safely reach their children and grandchildren. In fact, trusts are usu

For the People By the People

ally pretty solid ways of transmitting these funds to family member (the term “Trust-Fund Kid” is used for a reason). Particularly, these are some of the trusts that are used in a strong estate plan. These trusts accomplish a few things - they can either avoid taxation, cover taxation, or allow your family oversight over the funds:

Types of Trusts

• Spendthrift Trusts• Insurance Trusts (for paying Estate Taxes)• Charitable Trusts (to eliminate taxation)• Plans that involve Generation-Skipping• FLPs (Family-Limited Partnerships)• Charitable private foundations that aspire to charitable activity, while allowing family members the bulk of the control• Irrevocable Trusts

Other techniques would be to use self-cancelling installment notes (SCINs), which are essentially casual transactions made between family members that only reqire payments to be made during the du-ration of the seller’s (benefactor’s) life; these notes effectively end once the person is deceased. While these have been used successfully in the past, in the case of Bill Davidson, these maneuvers were rushed, and caught the attention of the IRS pretty quickly. However, with a compe-tent complex estate planner, you should be able to get your money to where it needs to go.

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