Currently, there are approximately 70% of Americans without a Will. Without this basic estate planning document, your loved ones may pay the highest possible taxes upon your death, lose some of the assets you have earned during your lifetime, and will have to handle a much more complex administration of your estate.
By way of example, consider these famous deaths: Elvis Presley died suddenly at the age of 42 with an estate worth an estimated $10 million. Of that amount, his daughter only received $3 million, as the other 70% was spent on estate taxes, administration costs and legal fees. With a proper estate plan, Elvis’ daughter certainly would have received more than a mere third of her father’s wealth.
Famous for their chewing gum, the Wrigley family is another great example of a missed opportunity. Both of William Wrigley’s parents died in 1977. Their death gave Mr. Wrigley controlling interest in the Wrigley company, but it also left a significant estate tax burden due to the IRS. The Wrigley’s had to sell their 80% stake in the Chicago Cubs for $20.5 million in 1981 to satisfy this debt.
Finally, Steve McNair, the famous NFL MVP, died in 2009 with an estate estimated to be worth $19 million but without even a simple will. In attempts to settle his estate, his wife tried to sell his interest in a Nashville restaurant, his ranching and farming business as well as his Nashville home. Not only did his murder shroud any hope of a amicable resolution of his estate, but the lack of any planning whatsoever left his wife and his children in a heated legal battle over the estate assets.
Although the most basic tenet of estate planning is a Will, the estate plan may and should encompass other aspects of your financial situation for when you pass. Estate planning is thoughtful foresight that protects your family, provides for their future, and makes your wishes known. If you pass without a Will in place, your assets will be distributed in accordance with State law in a process known as intestate succession.
Under the intestate succession laws in Georgia, a personal representative of the deceased is appointed by the Probate Court in order to marshal the assets, pay the debts and then distribute anything left over to the heirs. Heirs are the closest relatives of the deceased, including the spouse, if living, and the children, including adopted and those born out of wedlock. Stepchildren are not heirs. Heirs of other degrees are determined if necessary. A determination of the heirs is made by the Court, while your estate pays court fees, lawyer fees and other costs associated with probate handled by the Court and state law, rather than pursuant to your directions set forth in a Will. The Court and personal representative (which may or may not be a family member) may charge hefty fees (sometimes 5-15% of the value of the estate) to administer your estate. Above all, this process takes time. The probate of an estate handled by the court may take months longer than if you had clear, specific instructions regarding the distribution of your estate in a Will.
Having a Will does not avoid the probate process; rather, a Will is followed by the Court to determine who receives what property, who is appointed guardian of any minor children and who will be responsible for carrying out the wishes contained in the Will.
In order to ease the administrative burden on your family at your death and to save time and money on court costs and fees, you should plan accordingly now by contacting professionals who can help, such as an estate planning attorney, a financial planner, a CPA, and an insurance agent. All can work together to help you prepare a plan that fits your family’s needs. An exhaustive plan put in place by each of these professionals can also ensure you are taking advantage of any and all tax savings’ tools available to you.
Consider the following goals when thinking about your estate plan:
- Determining who receives what share of your assets.
- Deciding who will manage your estate and be responsible for distribution of the assets.
- Selecting a guardian for your children.
- If you own or control a business, providing for a smooth transition of management into the hands of persons who will effectively manage the business.
- Arranging your affairs so that the chance for disputes among your heirs is minimized.
- Making sure that your heirs can live with the estate plan. A plan that cannot respond to changes in the economy, or to unanticipated events, can burden the family.
- For individuals with charitable wishes, making sure that your vision will be fulfilled.
With these overall goals in mind, it is important to move forward in developing an estate plan that fits your family’s needs. At Hoffman & Associates, we define a basic estate plan as having the following essential components:
For individuals and families who are of higher net-worth, additional planning techniques may be introduced in order to reduce the estate taxes due upon death and take advantage of other tax savings strategies during your life. Some of these techniques include:
- Federal estate tax planning
- Irrevocable Trusts
- Annual and lifetime gifts
- College Savings Plans
- Grantor Retained Annuity Trust (GRAT)
- Self Canceling Installment Note (SCIN)
- Family Limited Partnership (FLP) and Limited Liability Company (LLC)
For more information regarding estate planning, business law or tax controversy and compliance, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com or call us at 404-255-7400.
In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose. The information contained herein is provided “as is” for general guidance on matters of interest only. Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. Before making any decision or taking any action, you should consult a competent professional advisor.