Journal of the Louisiana Dental Association

LDAwealth managementChad Olivier, CFP ®Wealth Consultant/LPL Branch Manager, The Olivier Group, L.L.C.Staying In Control: Who Gets Your Assets –Family or Uncle Sam?Most people share a love for the USA and haveprobably paid a fair amount in taxes. Nevertheless,without careful planning, your heirs could end up in atug of war with the federal government over yourestate. You may be able to avoid the governmentseizing more than their fair share with proper estateplanning. This involves taking the ranks and staying incontrol of your assets. Let’s look at an example:Dr. Jones (currently a widower) passes away with thefollowing estate:Cars ........................................................$25,000House ................................................$1,000,000Condo ..................................................$750,000Rental Property.....................................$500,000Investment Account..............................$500,000IRA ....................................................$3,000,000Art Collection .......................................$100,000Furnishings...........................................$100,000Bank Accounts......................................$100,000Life Insurance Policy........................$2,000,000**Owner of Policy: Dr. Jones, Beneficiary: kidsEstate for planning tax purposes = $8,075,000Approximate estate tax Dr. Jones’ heirs will owe:$8,075,000 - $2,000,000 (exemption allowed*) =$6,075,000$6,075,000 * 45% = $2,733,750*Currently, you are allowed to use a Unified Credit Exemptionof $2 million to offset your assets.The heirs will owe $2,733,750 in estate taxes thatmust be paid in full within nine months after Dr.Jones’s death. Where will the kids get the money to paythe $2,733,750 in Federal Estate Taxes? After the kidsreceive the $2 million in life insurance proceeds, theyshould liquidate the $500,000 investment account andthe $100,000 in the bank. After the liquidation, a taxbill of $133,750 still remains. The IRA will be taxed atthe kids’ current tax bracket if distributed and all of theother assets may be at the mercy of the current marketdue to low liquidity.Where did Dr. Jones go wrong?1. Bad Titling: He should not own his life insurancepolicy. An irrevocable life insurance policy trustwould have taken $2 million out of his estate.2. Advanced planning should have been considered: Dr.Jones could have looked into advanced planning,such as gifting part of the estate. This would haveprovided the kids with tax-free money thus loweringthe estate burden.3. Planning better in general: A large portion of theestate is in non-liquid items. This makes it difficultfor the kids to easily come up with estate tax money,causing them to use up most of the cash.With the appropriate planning, Dr. Jones wouldhave left more assets to his children instead of handinghis life-long earnings to Uncle Sam.tChad Olivier is owner of the firm The Olivier Group, L.L.C.in Baton Rouge, La., which specializes in retirement planningand wealth management for physicians, dentists and otheraffluent individuals and families. If you have any questionsabout this article or future topic suggestions, please call (888)465-2112 or visit us on the web at www.oliviergroup.com.Securities and Financial Planning are offered through LinscoPrivate Ledger Member NASD/SIPC. Please note that theabove article is for informational purposes only. It is notintended to serve as financial advice, nor is the Olivier Groupspecifically endorsed by the LDA. Financial planning requiresdetailed individualized analysis of each person’s specificsituation.CFP ® , Certified Financial Planner and arecertification marks owned by Certified Financial PlannerBoard of Standards Inc.30 LDA Journal