Planning to Reduce Estate Taxes

A client called because her husband had taken an unexpected turn and was hospitalized two days earlier. Besides their simple wills, health care proxies and durable powers of attorney, they had been putting off establishing a proper estate plan for years.

The couple had three adult children and four grandchildren. They owned their Southboro home and a vacation cottage in Cape Cod where their family spent a month every summer. Our client's husband had recently retired and had a substantial 401(k) and IRA to show for his life's work. They also had additional stocks, savings and miscellaneous investments worth around $1 million. Our client knew that she and her husband had a large estate. Now, on top of our client's concern for her husband's declining health, she was very confused and concerned about the tax implications if something should happen to her husband, and what would be left for their children and grandchildren.

Upon her husband's passing, the couple's jointly-owned real estate and her husband's IRA and 401(k) will pass directly to our client as the designated beneficiary. The federal"marital deduction" permits such property to pass to her free of tax. However, doing so would mean substantial federal and Massachusetts estate taxes upon our client's ultimate passing.

We were able to establish an efficient and effective estate plan for the family, taking advantage of both the Massachusetts and Federal estate tax exemptions that would have been lost upon the husband's death without tax planning. Unfortunately, our client's husband did pass away within the year. We were able to save hundreds of thousands of dollars in estate taxes upon our client's death by putting the new estate plan into action quickly. This ensures that their children and grandchildren will receive as much of their hard earned savings as possible without unnecessary gifts to the IRS.

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