With the lifetime gift and estate exclusion now at $ 5.45 million and with the existing portability each married couple now having $ 10.9 million of total exclusion, many think that there is no need for Estate Planning. However, there are numerous pitfalls that can create serious problems for you or your loved ones after you are gone. Some of the potential problems are listed below, and we encourage you to seek legal and tax/financial advice about your personal situation.


Each individual is allowed to gift up to $ 14,000 to as many individuals as you want without a requirement for reporting or the use of any of the lifetime exclusion amount. However, gifted assets receive a carryover of basis, so that, for example you gift $ 140,000 worth of stock to your ten children and grandchildren. Their basis is what you paid for the stock when you acquired it in 1970. So, when they sell the stock they will owe capital gains tax. Alternatively, if the stock passed through your Estate, there would have been a step-up in basis and no capital gains taxes would be due. Gifts can be a very useful tool, but care should be exercised in what is gifted.


Joint bank accounts can be very convenient, but you should know that the bank service representative who assists you in establishing or changing the account is likely not informed about potential problems that might arise. Joint owners each have 100% rights and access to the account; so the joint owner might withdraw all the funds. In addition, most joint accounts are right of survivorship accounts so that, for example, the daughter who is on the account may claim all that money as her own with the passing of the parent and the other children would be challenged to prove otherwise. There are other alternatives to joint accounts that can accomplish the purpose of allowing a child to pay a parent’s bills. Simply add the child as a signer on the account or create a Simple Power of Attorney document. Just remember, in general, joint accounts can have unexpected results.


Even with no Estate Taxes, the transfer of assets upon death will need to follow an orderly pattern and conform to the desires AS YOU EXPRESSED in your will or related Trust document. Generally, the local Probate Court will oversee that process. However, Probate oversight has two major drawbacks. First, all information processed through the Probate Court is available to the public for review and scrutiny; many prefer not to have their holdings and the related transfer recipients to be made public and shared among the community. Secondly, Probate Costs can be significant depending upon the size of an Estate, and with the joint transfer threshold now at $ 10.9 million dollars those costs could be very substantial. Hence, many people are choosing to use a Revocable Trust to hold assets during their lifetime and thereby avoid holding any significant assets in their individual capacity so that the Probate costs and public display of their information is eliminated.

Hopefully the cautions advanced above will encourage you to seek legal and tax/financial advice about your personal Will and Estate situation, and if you already have documents in place you should check with your advisors to see if changes are warranted. – J. Robert (Bob) Calliham, CPA