Property Ownership Analysis in Estate Planning - VERY Important
Oct 11, 2011
Continuing with my discussion on estate planning, a general overview, another important component involves property ownership. The focus here revolves around estate tax planning. If you have a taxable estate and an attorney who is putting together an estate plan with estate tax planning tools, it is imperative that you address property ownership for you and your spouse.
The goal is to have your assets owned in a way to fully utilize each of your estate tax exemption amounts. Ideally, half of the assets should be in the husband’s name and half in the wife’s name, and controllable by your respective estate plans. "Controllable" means that at death, the decedents’ assets are controlled by their estate planning documents. If these are set up to transfer automatically, separate from the estate planning documents, the estate tax planning tools will likely not be available, even if they are set in your wills. Moreover, if you choose to use a revocable living trust as your estate planning vehicle, the trust must control the property in a proper manner (watch out for retirement accounts). This is true for everyone and must be worked through with professionals.
Bottom line: If the asset passes at death in a manner other than your estate planning documents, the estate tax planning tools will not be available, even if they are part of the plan.
Every asset is different, so it is important to talk with your estate planning professional to ensure that your assets are "owned" properly and will be controlled by your respective estate planning documents. Without this step in the process, your estate planning likely will not work as you intended.
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Required Disclosure Pursuant to IRS Circular 230: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code; or (2) promoting, marketing or recommending to another party any transaction or matter addressed in this communication.