There are several expenses to consider when planning for the end of one's life so that survivors and relatives aren't left in dire straits when they suffer a loss. Financial planner Bryce Sanders has some tips for accounting professionals to keep in mind when helping clients with estate planning.
Here’s a nightmare scenario: Suppose a client had wealthy older parents. They had enough cash flow to live a comfortable life and made investments along the way. However, when the client’s father died, many securities in certificate form were left in the father’s name only, not to mention the safety deposit boxes and overdue tax notices in a pile of unopened mail. As his mother was on her deathbed, she apologized for the financial mess that she was leaving behind. What does this mean for your client?
What Is Dying Going to Cost?
Don’t let the above scenario happen to your client. Make sure they have addressed any estate tax issues as well as day-to-day issues before it’s too late. Your client should have a will in place and an appointed executor who can file papers with the court for probate. Lawyers can handle the paperwork, but there are expenses for their time and effort. Here’s what you need to know:
The probate court will validate your client’s will and confirm the appointment of the executor. Their job is to identify assets, make sure bills and expenses continued to be paid, pay off any liabilities and make tax payments. Simple estates are typically wrapped up within a year.
Spousal transfer of assets
Many people hold accounts under JTWROS status, which stands for joint tenants with right of survivorship. This avoids going through probate. Providing a death certificate to each institution where an account is held should be sufficient to retitle the accounts in the survivor’s name. Funeral homes will typically provide survivors with multiple copies of the death certificate. Generally speaking, spouse-to-spouse transfers aren’t taxable events.
Retitling accounts and hard assets
If real estate is held under JTWRO status or is community property co-owned with the spouse, the transfer should be straightforward. If the other owner isn’t the spouse, the situation becomes more complicated because the asset is part of the estate, and taxes might be due. Other assets might be held in a single name. The decedent’s will must go through probate to determine who gets what.
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Bryce Sanders is president of Perceptive Business Solutions Inc. in New Hope, Pennsylvania. He provides high-net-worth client acquisition training for the financial services industry. His book, Captivating the Wealthy Investor, can be found on Amazon.com.