Estates tend to follow a life cycle pattern of growth, maturity, and then termination. With proper planning, this cycle can occur over multiple generations.
The problem with the path forward is that it presents forks in the road, opportunities, and, unfortunately, potential traps for the unwary. In some situations, inaction is action. Favorable resolution of these issues impacts the longevity of an estate.
The challenge lies in making the right decision at the right time.
The planning process involves identification of potential issues associated with the transfer of property. This begins with a connection to the client and extends to other advisors.
Charts are a hallmark of the planning process. Firmly believing that a picture is worth a thousand words, diagrams are used to illustrate planning ideas.
Example of typical estate plan chart for a taxable estate.
Written advice is another hallmark of the planning process. For the client that wishes to also read the thousand words summarized by a chart, written advice provides recommendations with citations.
With this combination of charts and written advice, clients receive a clear understanding of the proposed action and anticipated tax implications.
The administration process involves navigation of probate, trust, entity, and tax requirements and, at the same time, identification of planning opportunities and potential pitfalls.
Death plays a critical role in our legal systems. Many issues ripen at death.
The executor is charged with handling the probate proceeding, preparation of the federal estate tax return, Form 706, and preparation of the basis information return, Form 8971.
The executor also makes the initial determination of the amount of estate tax due, which is imposed at a 40% rate in 2024, and the new basis under I.R.C. ยง 1014 for property acquired from a decedent, which has the effect of eliminating any built in gain.
Ultimately, property is timely transferred to the proper beneficiaries with the proper persons in control.
Likelihood of success increases with a combination of knowledge and skill.
Clients benefit from conservative advice drawing from study of the tax law and experience with estates, trusts, and partnerships.