This is an archived article and the information in the article may be outdated. Please look at the time stamp on the story to see when it was last updated.

Steve Diltz


Communicate with your family on what your portfolio currently looks like – accounts, investments, etc.

Place a transfer on death (TOD) on your accounts to avoid probating court

Give your children power of attorney and trading authorization

Set up an account for funeral expenses that your children can take cash from upon your death

Make your children your beneficiaries on your IRA and 401(k) accounts

Creating an Ethical Will
An ethical will allows you to share your vision for your family for generations to come. It can also go a long way toward instilling the values you expect your heirs to live by and encouraging them to consider how they contribute to their communities and the world. Ethical wills can be used by clients to talk about their life experiences and teach future generations the lessons they learned along the way. The exercise helps them identify and articulate the legacy they want to leave. Authors can write as much or as little as they want and can rewrite their ethical wills as their lives unfold. Although they have no legal standing, ethical wills, used in conjunction with documents that determine how assets will be distributed, can open up communication between generations while helping to inform and complement an estate plan. Wills and trusts put restrictions on money for important reasons, but can sometimes create resentment amongst family members. An ethical will serves as a way to explain why a plan was set up the way it was, and can serve as an important element in creating family unity by providing important context.

Empowering the Next Generation
Just as important as passing on your wealth is instilling your values in your children so they are good stewards of the wealth you’ve worked so hard to build. Consider including your children in decisions about the family’s charitable giving, or starting a family foundation to involve them in the philanthropic process. As parents, it’s our responsibility to teach our children important financial lessons like the importance of saving, mapping out our goals, and setting and sticking to a budget. According to the September 2012 Merrill Lynch Affluent Insights Survey (MLAIS), which explored financial sentiments of affluent investors, about 26 percent of affluent parents cited concern with having the inheritance in place for their children which they had planned to. Having your children join you for a meeting with your financial advisor can show them first-hand how you manage your investments and partner with your advisor to map out a plan to meet your family’s goals.

Wealth Transfer Opportunities after the Fiscal cliff Compromise
The fiscal cliff compromise addressed a number of important estate and gift tax provisions in a favorable way:
Permanently sets the exemption amounts. The fiscal cliff compromise permanently adopts the estate, gift, and generation skipping lifetime exemption amounts set in 2010, and indexes those exemptions for inflation. For 2013, the exemptions are set at $5.25 million. These lifetime exemptions are in addition to the annual gift tax exclusion that in 2013 permits an investor to give away $14,000 to as many recipients as he or she wishes.
Permanently sets the estate tax rate: The compromise raises the tax rate for the gift, estate and generation skipping taxes from 35% to 40% beginning in 2013.

The unprecedentedly high lifetime gifting exemption provides a significant wealth transfer opportunity. If a donor gives away $5.25 million now, the gift can appreciate during the remainder of the donor’s life. By the time the donor dies, the gift may have increased substantially in value. Yet that full amount will be entirely free of federal gift and estate tax.

In addition to paving the way for a $5.25 million lifetime gift tax exemption in 2013, the fiscal cliff compromise provides for a $5.25 million lifetime generation skipping transfer (GST) tax exemption. The GST tax is an additional tax levied on gifts that “skip” generations (for instance, a gift from a grandparent to a grandchild). By combining these exemptions, an investor can give up to $5.25 million to grandchildren entirely free of estate, gift, and GST taxes.

Post Mortem Planning

Post-mortem planning includes numerous complex legal and financial issues. Regardless of the size of the estate, financial planners should consult an experienced estate planning attorney to make sure neither they nor their clients misstep. Some activities must be handled by an attorney (probating the will) or a CPA (filing the deceased’s tax return and the federal estate-tax return), while others are in the planner’s purview. An attorney can make sure that all deadlines are met—the federal tax return of the deceased must be filed by April 15 of the year following the death and the federal estate-tax return, if applicable, nine months after death. Disclaimers must be done within nine months.

Secure 15–20 copies of the death certificate as soon as possible.

Help the surviving spouse decide on a trusted friend or relative to assist through the transition.

Provide a written checklist to the family for all the important documents: will, trust, powers of attorney, letter of instruction, life insurance policies, tax returns, retirement account beneficiaries. Remind the family to gather contents from safe deposit boxes.

Organize and prioritize the deceased’s bills; separate bills into deceased’s, spouse’s, and joint. Do not let the surviving spouse pay the deceased’s bills from his or her own funds—these are the estate’s responsibility. Notify creditors if there are any issues making timely payment. Check with creditors to see if there are death payments on loans or credit card accounts.

Open a bank account in the name of the estate.

Identify benefits to be claimed: insurance, Social Security, pension continuation, employer benefits (such as vacation, sick leave, expense reimbursement).

Identify pressing tax issues; for example, the required minimum distribution from the deceased’s IRA must still be taken before the end of the year. Review the last three years of tax returns.

Re-title assets.

Accompany surviving family members to a meeting with the attorney.

Work with the attorney to make sure appraisals are done and assets are properly valued.

Roll over and consolidate accounts.

Establish cash reserves. Begin documenting survivor’s cash flow to create a new budget and financial plan.

Review and revise investment policy statement and investment portfolio.

Address long-term health care needs of surviving spouse.

Update the surviving spouse’s estate plan; take care to thoroughly address new beneficiary designations, will, powers of attorney, and medical directives.

For more information about Merrill Lynch: