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What counts in estate planning

BOB PRIEST

Editors Note: This is the second of a multipart series on estate planning.

Dear Mr. Priest: Thanks, your column last week shed some light on the basics of estate tax. I know that the taxes are supposed to decrease over time and eventually stop. Can you explain how that works?

Becky

Breckenridge

Dear Becky: First of all, I think it is important to understand what assets count when we talk about someone’s gross estate for estate tax purposes.

I can’t tell you how many times I have heard a client say, “I don’t have enough money to have to worry about estate planning.”

I think there are two problems with this misconception: First of all, it doesn’t take much money to warrant at least planning what will happen with your estate when you die.

Secondly, most people have no idea what the true value of their estate really is.

In an effort to determine a family’s taxable estate, some of the obvious assets are their primary home, investment properties, retirement accounts, nonretirement investment accounts, bank accounts, automobiles, personal possessions and the most overlooked one – face value of all life insurance.

Many people have no idea that the face value, or death benefit, of their life insurance is often included in their gross estate for estate tax purposes. A common misunderstanding is that only the cash value in their life insurance will be used in the calculation.

Another misconception with many people is that since their retirement accounts and annuities have beneficiary designations and may avoid probate, it is assumed that these do not count in the estate for estate tax purposes.

This is absolutely not the case. I often ask a client what he or she feels their gross estate is worth and it’s not uncommon for people to be off by $500,000 to $1 million because they don’t understand exactly what is included. Additionally, if not done correctly, gifting assets or changing title to assets can have a dramatic negative impact on the estate tax exemption that someone is allowed.

There are often ways to restructure one’s estate so that certain large assets do not count, however, I must caution readers that this type of planning should only be done under the supervision of a certified financial planner and/or estate planning attorney.

Trying to accomplish this without the help of a qualified professional could result in a nightmare not only for you during your living years but your heirs for generations to come.

Next, we’ll talk about the specific exemption amounts and why dying in the year 2010 could be the best plan you ever had. Happy planning!

Bob Priest, MBA, CFP, is an independent certified financial planner serving clients locally and nationally. He can be reached at (970) 513-7077 or visit his Web site at http://www.BobPriestFinancial. com. All opinions herein are that of the author and not that of the Summit Daily News or its staff. Bob Priest is a registered principal offering securities through but not affiliated with SunAmerica Securities Inc. (SAS), a registered broker-dealer and member NASD/SIPC. Submit your financial questions to Bob@FinancialCompanies.com.


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