Estate planning is not just for the high-net-worth (HNW), or ultra-high-net-worth (UHNW). While the changes to estate and gift taxes in late 2010 that reunified these two taxes—and ways of transferring wealth—enabled some very dramatic savings for the very wealthy, (see "Estate Tax and Gift Plans Can Greatly Reduce Tax on Wealth Transfers," and "Estate Planning Demystified, and Saving Millions in Taxes on Gifts to Grandchildren,") there's a "call to action at every level," according to Benjamin Ledyard, director of wealth strategies at Silver Bridge Advisors.
While the new tax laws rejoined the estate and gift taxes, and provided for a $5 million exclusion from estate and gift taxes for individuals ($10 million for married couples), before doing anything else, help clients understand "Estate Planning 101," Ledyard advises.
Look at the client's life plan and estate plan, says Ledyard. "Ask clients how they'd like to distribute their wealth, to heirs, taxes, charitably and to family." He uses what he calls a "map" with boxes for each of the above and maybe a "family tree" under family. Once they've done an inventory of assets, ask them, if they "walk out of here today and get hit by a bus, how will the assets pass today—and will that hit your objectives," he advises. Then the planning can begin.
First, "explain how property is passed: by contract, by tenancy, or by will or estate planning documents, such as arevocable trust," Ledyard explains. One of the basic goals here is to keep property out of probate upon the owner's death. Property in a person's name or in their will goes through probate, but that which is passed via a contract or through joint ownership does not, he says.
Joint Tenancy
"Clients often overlook joint tenancy," in titling property in the way that is most advantageous for estate and gift tax planning, Ledyard explains. These are some of the joint tenancy options:
- Joint Tenants (JT)
- Joint Tenants With Rights of Survivorship (JTWROS)
- Joint Tenants by Entirety
- Joint Tenants in Common
These all apply to different client situations and it is vitally important that the titling is correct. "Fancy documents don't always coordinate with property titling," Ledyard says, and clients' intent "can be totally extinguished" if the titling is not properly done.
