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A corporate executive and his wife became clients of Private Wealth Advisors upon his retirement. We initially prepared a retirement plan and an investment strategy. The financial projection confirmed that their retirement goals were realistic and that implementing the recommended investment strategy would provide more than adequate income for their anticipated needs.
Once these basic foundation blocks were in place, we started the process of developing an estate plan. We wanted to develop the necessary documents and relationships that would ensure a comfortable and stress-free transition for the wife in the event her husband died first. Both the husband and the wife were comfortable that this was the beginning of a process that would put everything in place.
Preparing for the inevitable
The plan was set up in a manner that would insure there were more than adequate resources available to meet the needs of the widow. The document and ownership of assets also provided for the estate to ultimately be passed on to their children in a manner which would minimize any applicable federal estate taxes.
One of the strategies for maximizing the inheritance of the children was to use their annual gifting to purchase a very cost effective second-to-die life insurance policy which would provide the cash needed for the federal estate taxes that would be due at the time of the second death.
Doing everything possible
Eight years later the husband passed away after a protracted fight with cancer. Prior to his death we met several times to review the estate plan and to determine if anything else needed to be done in preparation for his death. Since we now knew that he was going to pre-decease his wife, we did change ownership on some highly appreciated stock so that his wife could avoid capital gains tax by taking advantage of the step up in cost basis which would occur at the time of death for assets in her husband’s name.
At this point, we concluded that we had done everything possible in anticipation of his death. The husband had peace of mind knowing that everything was in place to take care of his wife and his children.
A smooth estate transition-with lower taxes
At the time of death, we assured the widow and the children that everything had been taken care of and there was nothing they had to do right away. When they were ready to deal with estate issues, we scheduled a family meeting for the widow and the five children, with their attorney and representatives from Private Wealth Advisors. We presented a summary of the estate and discussed the estate settlement process. We presented a time line which identified who would be responsible for the various activities. We also established a schedule for future meetings to monitor progress and keep everyone informed.
This process took about fifteen months. One of the decisions that the widow made was to gift to the children the amount of her estate that could be transferred without federal estate tax. We had determined that she could do this without jeopardizing her own security. She wanted to give the children something now. And she also recognized that by transferring appreciating assets she would be avoiding estate taxes that would accrue if she continued to hold the assets in her estate.
The clients now meet with their PWA advisor on a regular basis – three times a year. One of these meetings is an annual family meeting which is attended by all the children.
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