While I believe that estate planners, in general, tend to talk about tax planning to the exclusion of personal planning, I do not in any way want to suggest the tax planning is not important.
A married couple with $2 million in overall assets can end up paying almost $100,000 to the Commonwealth of Massachusetts if they fail to adopt a simple and very common estate planning technique.
For couples with between $2 million and $10 million, recent changes in the tax laws have made income tax planning increasingly important. For most people, income tax planning is now more important than estate tax planning. Estate plans drafted before 2012 will, in all likelihood, not reflect this new priority, and need to be reviewed.
For couples with more than $10 million, or individuals with more than $5 million, most of the traditional estate tax planning concerns still remain. In addition, wealthier individuals are now faced with an increased potential income tax burden, due in part to the 3.8% Medicare tax imposed by the Affordable Care Act.
In the National Network of Estate Planning Attorneys, we talk about the Two Way Street ™ — that is, the need to balance the goal of access to trust assets with the goal of creditor protection. In advanced planning cases, it is more like crossing an eight lane superhighway. Planning has to provide for estate tax reduction, income tax reduction, creditor protection, preservation of cash flow, and long-term flexibility, among other goals. This planning process involves education and tools beyond those required in basic estate plans.
But even in advanced cases, human issues are the most important. The question “Will we have enough to live on in retirement?” has been answered. But now people must ask: “Will too much inherited money create problems for the family?” Wealthy individuals find themselves with the ability to have an impact on the world beyond leaving a financially secure family behind. The question “What is my legacy?” takes on added dimensions.