Don’t Procrastinate On Planning Your Estate

27 May 2014

Estate planning is a critical activity for anyone, married or single, no matter how small the estate. Because the process so deeply affects—and is affected by—family dynamics, there’s no one-size-fits-all solution.

“Estate planning can get very complex,” says Eric Rigby, principal and financial planner at Rigby Financial Group. “To ensure smooth transitions and positive outcomes, everyone needs to have a highly individualized plan appropriate to their situation.”

Married couples in particular need to understand the concepts of estate tax exclusion and portability, and recent IRS changes concerning them. For example, large estates can be subject to substantial estate taxes. But if your estate’s worth falls below a certain threshold, you’re not required to file an estate tax return or pay estate taxes. The amount of that threshold is your “exclusion.”

Starting in 2014, that exclusion amount—the threshold—increased from $5.25 million to $5.34 million per person, or $10.68 million for married couples. When the first spouse dies, any unused estate tax exclusion amount transfers over to—and can be used by—the surviving spouse. It’s portable, in other words.

The Portability Paradox—and the IRS Fix

Here’s the problem. The portability election must be made on the estate tax return (Form 706) of the spouse with the unused exclusion. But these estates wouldn’t typically file an estate tax return because the value of their assets is below the filing threshold, therefore the surviving spouse must file an estate tax return to receive the descendant’s remaining exclusions via portability.

The Form 706 filed on the decedent’s behalf must compute the amount of the unused exclusion. The return also must specifically state that it is being “FILED PURSUANT TO REV. PROC. 2014-18 TO ELECT PORTABILITY UNDER Code Sec. 2010©(5)(A).” That’s a mouthful, but important language to trigger the extension.

What Does This Mean for You?

You might be saying “How does this apply to me? My estate is worth much less than $5.34 million!” (And if you’re saying that your parents’ estate is worth much less that that—well, you might be surprised.) The point is that no matter how large or small your estate, you need an estate plan. And your estate plan must be highly individualized based on your particular set of circumstances.

Good estate planning considers questions such as:

  • How big is the family? What are the family dynamics?
  • Are there one or more family businesses (most wealthy families have several)?
  • Are there life insurance policies? Retirement accounts? Brokerage accounts? Real estate holdings? And who are the beneficiaries?
  • Who has durable and/or medical power of attorney?
  • Is there a will?
  • How will physical assets be distributed? In other words, who gets that collection of World War II memorabilia?

Don’t assume that your children or family members know what you want done with your assets when you die. They may not even know what all of your assets are or where they’re located.

Have that Estate Planning Talk Now!

Estate planning is the time to make sure that someone, even if it’s your financial advisor and not a family member, knows your entire financial picture. While it may lead to some difficult conversations, estate planning is best done while everyone is in good health.

But many people have ingrained misperceptions about wills and transfers of wealth. Here are some of the most common myths.

Myth #1:

The proverb “from shirtsleeves to shirtsleeves in three generations,” especially when it comes to family businesses, is inevitable.


This saying reflects the idea that the first generation creates wealth, the second generation spends it, and the third generation ends up back in shirtsleeves—in another word, broke! And in fact there is a historical 70% failure rate in estate transitions. 1 But if family wealth doesn’t perpetuate itself, it’s due in part to a lack of planning. Proper estate planning can help avoid this issue.

Myth #2:

If you have to sell the family business, you’ve failed.


You may have no interest in—or suitability for—the family business. It might be better to sell it to someone who does. But have those honest conversations with your parents before it’s too late.

Myth #3:

Father knows best.


Not necessarily. The patriarch (or matriarch) may have done business in a way that worked 40 years ago. When planning for the future, you need to examine internal beliefs and compare them with what’s best for family members.

Myth #4:

No one will discover my secrets.


They will. After you’re gone, that second family (or whatever secret you have) will come out. It’s best to address situations now rather than leaving them for your grieving family to untangle after your death. No one makes good decisions when they’re stressed or anxious.

Myth #5:

Talking about my estate will cause conflict among my family members.


In our experience, proper estate planning is more likely to keep a family together, whereas the lack of it will cause more conflict.

The bottom line: Estate planning is an extremely personal, yet critical, process that must be tailored to your specific circumstances. Make sure your wishes are known. Take the time to work with a trusted advisor—one with expertise in estate planning—to carefully plan what will happen to your estate.

Rigby Financial Group offers extensive services in the areas of personal financial planning. Please contact us for advice and assistance in creating your estate plan.

1. Williams, Roy, and Preisser, Vic, Preparing Heirs: Five Steps to Successful Transition of Family Wealth and Values, Robert Reed Publishers, 2010.


The information presented here is not specific to any individual’s personal circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.