Give and Receive Assets with Confidence

Physician's Money DigestNov30 2004
Volume 11
Issue 22

Rising affluence and an agingpopulation are expected totrigger a vast transfer ofwealth over the next 30years. According to the Social WelfareResearch Institute at Boston College,approximately $40 trillion will passfrom one generation to the next by2052. With so much wealth changinghands, the need for estate planning isbound to increase. At the same time,investment planning will be paramountfor those who inherit assets. Therefore,what follows are a few planningthoughts for givers and receivers.

Necessary Protection

A variety of legal documents andtools can help ensure that your assetsare distributed according to your wishes.These documents and tools include awill, powers of attorney, and trusts.One type of trust you may want to consideris a living trust, which can helpyou control assets while you are aliveand potentially provide tax benefits.

Beneficiary note:

Assets held outside your will,including life insurance contracts, IRAs,and employer-sponsored retirementplan accounts, will pass directly to beneficiariesyou've named to receive them.Consequently, it's necessary to keepsuch beneficiary designations up to dateand accurate. In somecases, you may want to plan for specialcontingencies. For example, you maywant to arrange for a custodian to managean investment account for yourteenage child until they reach legal age.

Savings Opportunities

In addition to ensuring that yourassets are passed on to the right recipients,estate planning also allows youto reduce taxes. New federal estate taxlaws were established in 2001, whichprovide for a gradual reduction ofestate taxes through 2010. Under currentrules, taxpayers can exclude thefirst $1.5 million of an estate's assetsfrom federal estate taxes in 2004. Thisexemption increases to $2 million in2006 and $3.5 million in 2009.

The law also decreases estate taxrates. Currently, the top estate tax rate is48%. This rate gradually decreases to45% in 2007, and in 2010, the estate taxwill be repealed. In 2011, however,unless Congress intervenes between nowand then, the estate tax will revert to thepre-2001 tax structure, with a $1-millionexemption and a top rate of 55%.

Current tax laws create a great dealof opportunities for wealth distribution.However, vigilance is required.For instance, you may want to reviewyour will and trusts, as well as rebalanceassets, to ensure that the divisionof wealth among you, your spouse, andother beneficiaries is accurate.

Windfall Precautions

Receiving an inheritance opens upits own set of investment, tax, andestate planning issues. Think carefullyabout how to make the best use ofinherited money. For example, shouldyou use it to reduce debt? Should youinvest it? If you decide to invest themoney, review your priorities. Figureout if you're on track to meet yourretirement needs. If you have children,make sure you're setting aside enoughfor their education.

Recipient reminder:

While a windfall can help youmake progress toward achieving yourfinancial goals, it must be managedeffectively to retain—or enhance—itsvalue. For example, rolling a retirementplan distribution into anotherqualified tax-deferred retirement planmay allow you to avoid costly taxes.Whenever you arethe recipient of a windfall, talk withyour financial advisor about youroptions. After all, your inheritancetoday could be part of the wealth youtransfer to the next generation.

is the president of Apollonia Financial Services in Elkins Park, Pa. All securities

offered through Linsco/Private Ledger, member SIPC. Past performance is no guarantee of future

results. The information presented is the opinion of Scott J. Kleiman and not Linsco/Private Ledger. Mr.

Kleiman welcomes questions or comments at 800-242-1760 or This article is

not intended to provide specific advice or recommendations for any individual. Consult with your financial advisor if you have questions.

Scott J. Kleiman

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