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40% of U.S. workers have saved
less than $25,000 for retirement.*

*2019 Retirement
Confidence Survey, EBRI

Only 42% of Americans know how
much money to save for retirement.*

*2019 Retirement Confidence Survey, EBRI

43% of retirees left
the workforce earlier
than planned.*

*2019 Retirement
Confidence Survey, EBRI

You Can't Take It With You

How would you like to work hard your entire life to achieve financial success, only to lose it by making uninformed estate planning mistakes?  Those mistakes can result in your family losing over half of the assets you have accumulated.  They can destroy much of what you worked for your entire life not to mention inflicting a great deal of heartache and pain on the people you love.

Ironically, most mistakes are easily avoided.  With some foresight and proper planning, you can construct estate plans that will perpetuate your estate for generations.  However, to do this, you must plan to avoid these traps.



Everybody has an estate plan.  If not created by you through the use of carefully drafted wills, trusts and other documents, then your state will implement a plan of its own.  This plan, called the laws in intestacy, dictates who will get your assets and how they will receive them, while also charging your estate with the highest possible estate taxes.  Pennsylvania does collect a state inheritance tax that ranges from 4.5% to 15% depending on the relationship to the deceased.

If you’re comfortable with the state delegating your assets after you’re gone and have no problem paying the highest tax rate, then no work on your part is necessary.  If you find this worrisome, then you have to develop estate plans of your own, and they have to be done now!

The “I Love You” Will

Most people have very simple wills.   They state that when you die, all of your possessions go to your surviving spouse, and when both of you are gone, all possessions go to your children.  Very simplistic, and this works fine for people with small estates.

For people with larger estates the simplistic approach will not do.  A joint estate that exceeds $2,000,000, will create thousands of dollars of unnecessary taxes when using an “I Love You Will”, approach.  The simple will approach wastes an opportunity to keep up to $2,000,000 of assets free of estate taxes.  On an estate of over $2,000,000, such an error can cost $300,000.

The solution is to have provisions in your will or living trust agreements, which creates a bypass trust (also known as a credit-shelter trust) at the death of the first spouse.

Unbalanced Property Ownership

If each spouse owns assets equally, then bypass trusts can function neatly to avoid estate taxes on “up to” $2,000,000 of assets.  However, if one spouse owns a majority of the estate, the bypass trust’s effect wil be largely wasted if the less affluent spouse dies first.  To avoid this pitfall, yo should consider the benefits of balancing your assets.

Property Transfers Based On Non-Will Provisions

The majority of the people believe that their wills will control who get what when they die.  Surprisingly, many assets are transferred based on provisions. Which can contradict, and supersede, those of a will.

Bank accounts, CDs retirement plans, IRAs, annuities, life insurance policies, real estate and countless other assets are often not controlled by wills.  In the case of jointly owned assets, (bank accounts, stock accounts and real estate are often owned this way) the surviving joint owner often becomes the sole owner of the assets.  Retirement plans, IRAs, annuities and lif insurance policies transfer to named beneficiaries, not necessarily to people named in a will.

Property ownership forms and beneficiaries designations need to be coordinated with your planning.  If they are not, your carefully drawn will could be meaningless, and the estate tax savings which it tried to create, will be defeated.

Improperly-Owned Life Insurance

Life insurance is generally a significant part of most estates.  Most people have life insurance to provide immediate liquidity to the ones they left behind and the benefits are tax-free.  They are only half-right.

Life insurance benefits are not subject to income tax.  However, they are subject to estate taxes if the insurer owns the policies after their death.  This can destroy up to 60% of the policy value.

A way to avoid this is to have life insurance owned by a irrevocable trust.  While the needs of the surviving spouse need to be addressed, life insurance, which is intended to pass to future generations, should clearly not be owned by the insured.

Trying To Take It With Them

There are only three ways to reduce estate taxes:  spend the money, have a bypass trust, or give it away while alive.  Of course, you can always have the government expropriate what it thinks is fair.

Affluent people, especially the self-made variety, often do a very poor job of spending it or giving it away.  They got where they are by being “accumulators” and they have a hard time with changing a lifetime habit.

While thrift is an admirable quality, too much of it plays right into the hands of the IRS.  The IRS and Congress want you to have the biggest estate possible when you die.  They want your ignorance, procrastination and paranoia to stop you from taking advantage of a whole range of laws which can result in your estate paying zero taxes while you maintain your financial independence.  The IRS collects million and millions of estate taxes each year because people never quit being “accumulators”.                

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Check the background of this financial professional on FINRA's BrokerCheck