Help Your Clients Polish Up on Their Estate Planning and Personal Etiquette This Month

Important Probate Rules Everyone Should Know:

When a person dies, what happens next depends on whether the deceased person had any foundational estate planning documents such as a last will and testament (otherwise known as a will) or trust, who their living relatives are, and their relationship to the person who died. If the deceased person did not have a trust or will, the state where the deceased person resided has rules for overseeing how the deceased person’s money and property are to be distributed. If the deceased person died owning accounts and property in their own name and had a will, it will contain instructions for what is to happen to the decedent’s money and property and must be filed with the probate court. Probate is a formal legal process of proving that a will is valid (if the person had a will), appointing someone to carry out the deceased person’s wishes (known as a personal representative or executor), and supervising the distribution of the deceased’s money and property.  

While probate rules can vary by state, there are some important ones that you should be aware of for your own personal knowledge and to better serve your clients who may be in charge of wrapping up a deceased loved one’s affairs. 


Deadlines are important rules that must be followed during the probate process. Failing to meet these deadlines could cause trouble for those in charge of an estate administration.

When and if to file the last will and testament. If and when a will must be filed with the probate court can vary by state, but it is important that your clients understand when this task needs to be completed. Some states require that a will be filed with the probate court within a certain number of days after the decedent’s death, while others only require that a will be filed if a probate is necessary. This might occur when the decedent died owning accounts and property in their sole name that need to be transferred. Once the will is filed, the court will generally begin by reviewing the will to ensure that it was properly made and signed. If the court is satisfied, it will appoint a personal representative.  

Collecting and securing items. The personal representative must locate and secure the deceased person’s money and property and create an inventory of all items. Deadlines for filing an inventory with the court are usually calculated from the date your client was appointed as personal representative and can vary greatly among states, from sixty days in Florida to six months in New York. The inventory will include a valuation of the items as of the date of death. During this period, the personal representative may also need to establish a tax identification number for the estate and open an estate checking account for depositing estate funds.

Notifying creditors. The personal representative must notify known creditors and attempt to find unknown creditors. Generally, at the direction of the probate court and with the assistance of an experienced estate administration attorney, the personal representative is required to publish notice of the deceased’s death in appropriate newspapers to run for a specified length of time. This notice is typically published in the local newspaper where the person died. The purpose of this notice is to allow creditors, both known and unknown, time to make a claim to the estate for any debt owed. The personal representative must then determine the validity and priority of all creditor claims received and pay those claims as appropriate.

If the personal representative follows the correct steps regarding notice to creditors, any debts not brought to the personal representative’s attention during the applicable time period established by state law may be barred, and the estate may not be responsible for paying them. The creditor deadline gives creditors an opportunity to come forward with their claims, but it also provides a cutoff point for the personal representative so they can wind up the deceased’s affairs in as efficient a manner as possible.

Maintaining and providing estate accounting records. The personal representative must maintain accounting records as proof of monies coming into and going out of the estate. Depending on the circumstances, the accounting records may need to be filed with the court, and interested parties may need to sign releases at certain intervals.

Filing and paying taxes. A personal representative must ensure that the deceased’s final tax return is filed by the personal income tax filing deadline of the year following the deceased’s death. If the estate earns income after the deceased’s death, the personal representative must file estate income tax returns (sometimes referred to as fiduciary income tax returns). Finally, a personal representative may have to file an estate tax return if required by law or for further tax planning. Each of these returns will have a specific deadline.

Who Has to Know

During the probate process, there are a lot of steps that are involved, and there may be multiple individuals who need to be kept informed about what is happening. If the deceased had a will, this would include those named in the will (beneficiaries). In some states, the deceased’s relatives and the deceased’s creditors can also be interested persons. When dealing with individuals other than those the deceased named in a will, it may be tempting to leave them in the dark, especially if there has been bad blood. However, personal conflicts do not absolve the personal representative of the duty to keep an interested person informed and to provide them with the information they are legally entitled to.

Who Can Be Put in Charge

Another important probate rule is who can be appointed as a personal representative. The personal representative can be almost anyone. Many states require that the personal representative be an adult or an emancipated minor. However, some states may not appoint a personal representative who is a non-US resident, nonstate resident, or a felon. Most often, a personal representative is a surviving spouse, a family member, a close family friend, or an attorney. There is no requirement that the personal representative have any experience or expertise in handling estate matters, nor is the person required to have any financial or legal experience or background.

We Are Here to Help

Probate is a process with many rules. We understand that this can be overwhelming for some clients, and we are committed to working with nominated or appointed personal representatives to ensure that their administration is as smooth as possible with no missed deadlines and follows all the rules. If you would like to learn more about the probate process, reach out to us to schedule a meeting. 

Helping Clients Slice the Pi(e)

What? You didn’t know that March 14 (3/14) is National Pi Day? We didn’t either until recently, but now we know that this celebratory day was established (you guessed it!) by a physicist (Larry Shaw) to recognize the mathematical constant (𝛑) whose first three digits are 3.14—probably as an excuse to devour lots of pie. National Pi Day is a great occasion to invite your clients in to enjoy a slice of pie and discuss their financial planning, as well as how estate planning will help them determine how they should slice their financial pie when they pass their wealth on to their children and loved ones. No complicated mathematical formulas are necessary to determine whom they would like to leave their money and property to, but it is an important subject that requires some serious thought.

How Should Clients Slice Their Pie?

With only a couple of possible exceptions, clients are free to use their estate plan to slice up their wealth for the benefit of anyone they choose. Some common beneficiaries that your clients may choose are spouses or other significant others—such as their boyfriend, girlfriend, or partner—and their children. More and more people are also leaving money in trust to be used for the care of their pets. Others want to provide a gift to one or more close friends when they pass away. Some clients may choose to include institutions as well as people or pets in their estate plan: if they have a strong relationship with a favorite alma mater, charity, or church, they may choose to leave money or property for its benefit.

It is crucial for your clients to create an estate plan to ensure that each person or institution gets the slice they intend. Without an estate plan, their money and property will be divided up according to state law, which may not provide the result they would have wanted. The state’s intestacy statute typically provides that if a deceased person had no will, the surviving spouse will inherit everything, but if the deceased person had children from a prior relationship, the estate will be divided between them and the surviving spouse. If there is no surviving spouse or children, the estate may go to the deceased person’s parents or siblings. In the absence of any surviving family members specified in the statute, the deceased person’s money and property go to the state. This means that if the deceased person had stepchildren or foster children who were beloved but not adopted, or a significant other who was not a spouse, those loved ones will receive nothing. In addition, a person who did not have family members or did not want to leave their money and property to their family will lose out on the opportunity to leave their wealth to a charitable organization or other institution of their choice; instead, their wealth will go into the state’s coffers.

By creating an estate plan, your clients can specify not only to whom they want to leave a slice of their pie but also the size of that slice. For example, they may want each of their children to receive an equal inheritance, or they may choose to divide up their wealth among their children based upon what they think each one needs. Children who are disabled and unable to provide for themselves may need more than other children who are independently wealthy. There is no right answer: it is up to your clients to determine those to whom they want to leave their money and property and the size of each gift.

Depending on state law, there may be a couple of exceptions that have at least some impact on clients’ ability to specify the size of the slices of their pie:

  • Spouse’s elective share. Nearly every state has a statute that protects a surviving spouse from complete disinheritance by allowing them to elect to take a certain portion, such as one-third or one-half, of their deceased spouse’s estate. In some states, the size of the elective share may depend on whether the deceased spouse left behind children, grandchildren, or parents in addition to their spouse. The surviving spouse’s elective share may be smaller if there are other surviving relatives who would benefit from the deceased spouse’s estate.

Some states’ elective share statute applies only to the probate estate, that is, accounts and property that are held in the deceased spouse’s individual name. However, other statutes also subject money and property that the deceased spouse had transferred to a revocable living trust during their lifetime to the surviving spouse’s elective share. Elective share statutes are generally a default rule, so a surviving spouse may contractually waive or modify their right to an elective share if they sign a premarital or postmarital agreement to that effect.

  • Family allowance. Under state law, the surviving spouse, minor children, and adult children with special needs may be entitled to an amount from the deceased person’s estate necessary for their maintenance if they are able to demonstrate their need to the probate court. The money and property considered in determining the amount to which the spouse or children may be entitled vary depending on state law. Often, if the family allowance is determined to be available, it will be paid to the spouse or children before gifts are made to other beneficiaries named in the deceased person’s estate plan or most other claims against the estate. If there are insufficient funds in the estate to cover the family allowance, the court may order the sale of estate property.

You Can Help Your Clients Slice Their Pie How They Want

Review beneficiary designations. In addition to encouraging your clients to create an estate plan, you can help them review the assets under your management to ensure that they have named beneficiaries on their accounts. If the accounts were established years ago, your clients should consider whether the person or entity named is still the beneficiary they would like to receive that particular slice of their financial pie. If no beneficiaries have been named on their accounts, your clients should designate one or more beneficiaries to avoid the need for the accounts to go through probate and be distributed according to the terms of their will or state law if they did not have a will.

Evaluate their accounts and property. You can also help your clients determine if their assets are sufficient to provide for their beneficiaries in the way they wish. This is particularly relevant for clients who have many beneficiaries and are concerned that their current money and property will provide smaller slices of wealth for each one than they desire. If their current accounts and other property are insufficient, you have the opportunity to suggest solutions such as additional life insurance or adjustments to their financial and investment plans. 

Determining who receives a client’s money and property, as well as how much, are important decisions that are the cornerstone of most estate plans. By working together, we can help clients legally document their wishes and ensure a smoother administration when the time comes. If you would like to discuss ways we can partner together to serve our mutual clients, please reach out to us.

Do Not Let Your Clients Rely on Luck When It Comes to Their Minor Children’s Future

We associate March with St. Patrick’s Day and Irish traditions such as searching for four-leaf clovers, which are thought to bring good luck. One thing that parents should never leave to luck is providing for their minor children. Parents work hard to create a wonderful life for their children and pass on wealth to them in the future, but they also need to create a plan for their children’s care if something happens to them. Although it will be difficult for them to think about having their young children grow up without them, they need to recognize that lack of planning for this possibility could be disastrous for their children. This is an opportunity to strengthen your relationship with clients who are young parents by providing the financial and investment advice they need to provide for their children. 

Recommend that parents of minor children create an estate plan. If clients who are parents of young children fail to create an estate plan, the fate of their children’s care will be left to a court. Instead of nominating individuals they trust to provide care for their children and manage the children’s inheritance for their benefit, the court must choose who will fill those roles, and it may not choose the people the parents would have wanted. Even worse, a lack of planning may mean that they will not leave enough money and property to fund their children’s upbringing: this is a terrible problem that you can help them avoid by evaluating whether they should obtain additional life insurance to provide for their children’s care. In addition, the lack of an estate plan will mean that the parents will not have any input into who manages their accounts and property through the probate process after they die. The personal representative that the court appoints may not be as familiar with their money and property as you are and may not continue to keep their accounts under your management. If they have an estate plan, they can provide for how their accounts are to be managed in their trust document instructions, which puts you in a better position to continue managing their accounts for the benefit of their children. 

Think twice about advising parents to name their minor children as beneficiaries on accounts. Typically, naming beneficiaries on investment and retirement accounts is important to avoid probate of those accounts. If these accounts represent most of their wealth, parents may mistakenly believe that no estate plan is necessary. In the case of minor children, however, probate may still be necessary even if their minor children are named as beneficiaries of the accounts. Although state law varies, an interested adult may request that the funds be placed in an account established under the relevant state’s United Transfers to Minors Act if the value of the account is below a certain amount, for example, $20,000, which will be managed on their children’s behalf. However, a conservator may need to be appointed by the court to manage the funds on behalf of the children until they reach the age of majority if the accounts have significant value. As mentioned, in the absence of an estate plan, the person the court appoints may not be the person your clients would have chosen and may not understand how your clients would like the funds to be used for their children. There is also a risk that whoever is appointed to manage the inheritance will liquidate the accounts or switch them to another financial advisor rather than maintain them under your management.

Parents also may not want their children to receive a substantial amount of money at the age of eighteen or twenty-one (the age of majority may vary by state). Many parents believe that their children will not be mature enough to responsibly handle a large inheritance at such a young age. However, unless the parents create an estate plan including a trust specifying that the funds should be held and distributed for the children’s benefit at a later date, the children will have full access to their inheritance and it could be spent quickly and wastefully. If the funds are quickly dissipated, not only will the parents’ goal of providing for their children be frustrated, but you will have no opportunity to continue your financial planning relationship with the next generation.

Give Us a Call

You can strengthen your relationship with your clients who are parents by encouraging them to contact an experienced estate planning attorney who can help them create or update their estate plan instead of leaving their children’s future to chance. We can not only help your clients achieve their goal of providing for their children’s needs if something should happen to them but also facilitate their purchase of financial products such as insurance that are necessary to provide sufficient funds for their children’s needs until they reach adulthood and beyond. In addition, your clients are likely to want you, as their trusted advisor, to continue managing their money for the benefit of their children. Their intentions can be included in their estate planning documents, providing you with an opportunity to establish a strong relationship with the next generation. Give us a call to discuss how we can help your clients safeguard their children’s future.

Help Your Clients March into a Great Spring

Why Women Need a Plan

In 1987, Congress passed a law recognizing March as Women’s History Month—a time to honor the contributions and achievements of women throughout American history in a variety of fields. Women have played a vital role in building the United States into a strong and prosperous nation. Likewise, women are often the backbones of their own families, frequently focusing on meeting the needs of others rather than their own. However, it is important for women to take care of themselves through financial and estate planning designed to provide for their own future needs, which may differ from those of their male family members, as well as family members who may be dependent on them.

Planning Considerations for Women

Longer life expectancies. According to Social Security Administration data, in 2021, women had an average life expectancy of 79.5 years compared to 74.2 years for men. As a result, it is important for women to create an estate plan that accounts for additional years of living expenses during retirement, healthcare costs, and possibly long-term care costs. As women age, there may be a greater possibility that they could become incapacitated and need someone to act on their behalf to make financial and healthcare decisions. Documents such as financial and healthcare powers of attorney and living wills authorize a person they trust to make decisions or take action for them if they are not able to act for themselves. Some women may not only own their own assets but also inherit wealth from both of their parents and a spouse who dies before them, and if so, they need a financial and estate plan to optimally preserve and transfer this wealth. Because women may outlive their spouses, they also may be responsible for administering their spouse’s estate or become the sole surviving trustee of a joint trust. These duties may be difficult for a woman who is experiencing health issues that often occur at an advanced age, and this possibility should be addressed in their estate planning. For example, a woman concerned that she will be unable to handle administering her trust at an advanced age can name a co-trustee or successor trustee to administer it if she is no longer able to do so.

Lower earnings. According to U.S. Census Bureau data, women continue to earn less than men, and the pay gap widens as they age. In addition, because some women have shorter employment histories due to time off to raise children or care for aging parents, they may have less saved for retirement. As a result, it is important for them to take steps to protect their money and property from lawsuits or creditors’ claims. For example, a woman could transfer her money and property to an irrevocable trust. Because she is no longer the legal owner of the property, a creditor cannot reach it to satisfy claims against her, assuming the trust is properly drafted to include appropriate distribution standards and administrative and other provisions. The woman may be a discretionary beneficiary of the trust, and the trustee may distribute the funds she needs for living expenses. Additionally, because they may have less money and property during their retirement, women need to have a solid plan in place to make sure that they are able to financially provide for their loved ones upon their death and that unnecessary costs and expenses are minimized to the extent possible.

Care for loved ones. Many women are caregivers for minor children, adult children with special needs, or aging parents. As a result, they are often concerned about who will care for their loved ones if they are no longer able to do so. If a spouse or sibling is not available to provide care, they need to make sure that another family member or trusted individual can be the caregiver (sometimes called a guardian of the person) for their loved one. The same individual—or someone else—can serve as the guardian of the loved one’s estate (sometimes called a conservator or guardian of the estate) to manage the inheritance for their benefit. In the case of a child with special needs, if no family member is able to take on the responsibility of their care, a group home or assisted living facility may be the best choice. A special needs trust may need to be established to ensure that funds are available for the child’s care but do not decrease the amount of government benefits they are eligible to receive.

Your Crucial Role as Financial Advisor

Your female clients count on you to help them invest their money appropriately to maximize their savings and inherited wealth for retirement, healthcare needs, long-term care, and care for loved ones who depend on them. As their trusted advisor, you can also advise them about whether their insurance is sufficient to provide the funds they need. They may have some disability and life insurance coverage through their employer, but you can evaluate whether it is sufficient to cover their needs if they are no longer able to work due to illness or injury, and if additional life insurance is needed to pay for the care of family members who are unable to provide for themselves or fund a special needs trust. Please give us a call so we can work together to address the unique needs of our women clients and provide them with the peace of mind they deserve.

Help Clients Plan for a Great Spring

Retirement Planning Update

Although we are still in the midst of winter, spring is on its way. As you remind clients about April deadlines for retirement contributions and required minimum distributions (RMDs) and meet with them to discuss their retirement planning, keep the following recent developments in mind. 

IRS Proposed Regulations for Required Minimum Distributions

In 2020, the Setting Every Community Up for Retirement Enhancement (SECURE) Act created a ten-year payout rule for most inherited retirement assets, so that the account must be fully withdrawn by the end of the calendar year that includes the tenth anniversary of the date of the participant’s death. Although many initially believed that no RMDs were required in years one through nine following the death of the plan participant, in February 2022, the Internal Revenue Service (IRS) issued proposed regulations clarifying that RMDs are, in fact, required each year under many circumstances during the ten-year period. This caught many beneficiaries by surprise, especially those who opted not to take distributions in 2021 or 2022 in good faith based on the information they had. 

However, on October 7, 2022, the IRS issued Notice 2022-53, which states that the IRS will not penalize beneficiaries for not taking those RMDs. However, beneficiaries will have to ask for a refund of any excise tax already paid; the IRS will not automatically reimburse it. This relief applies only for the 2021 and 2022 distribution calendar years. In contrast to the February 2022 proposed regulations, which stated that the final regulations would apply to 2022 and later distribution calendar years, Notice 2022-53 also indicated that any final regulations issued by the IRS regarding required minimum distributions under I.R.C. § 401(a)(9) will apply no earlier than the 2023 distribution calendar year.

The proposed regulations also clarify the age of majority under the SECURE Act: the child of an employee with an IRA is considered to have reached the age of majority on the child’s twenty-first birthday. However, defined benefit plans that have used a pre-Secure Act definition of majority may continue to use that definition.

Extension of Deadlines for Amending Retirement Plans

On August 3, 2022, the IRS issued Notice 2022-33, which provides plan administrators with extensions to amendment deadlines applicable to certain changes under the SECURE Act, the Bipartisan American Miners Act of 2019, and the Coronavirus Aid, Relief, and Economic Security (CARES) Act. In general, the following deadlines apply to make mandatory and discretionary amendments under the Acts:

  • For nongovernmental qualified and 403(b) plans, the amendment deadline has been extended to December 31, 2025.
  • For governmental qualified and 403(b) plans, the amendment deadline is ninety days after the close of the third regular legislative session that begins after December 31, 2023.
  • For governmental 457(b) plans, the amendment deadline is the later of 90 days after the close of the third regular legislative session that begins after December 31, 2023, or the first day of the first plan year beginning more than 180 days after the date of the IRS notification that the plan was administered inconsistent with I.R.C. § 457(b).

Prior to Notice 2022-33, the deadlines for adopting the amendments were December 31, 2022, or December 31, 2024, for governmental plants and certain collectively bargained nongovernmental plans. The extension is especially important due to the extensive amendments to retirement plan provisions required by the SECURE Act, including (1) the increase in the age for required minimum distributions from age 70½ to age 72, (2) the expansion of coverage for long-term part-time workers, and (3) the elimination of lifetime stretch payments for most beneficiaries of inherited retirement accounts. The passage of the SECURE Act 2.0, which resulted in additional amendments, is likely one of reasons for the extension.

SECURE 2.0 Act 

On December 29, 2022, President Biden signed the $1.7 trillion omnibus spending bill, which included the SECURE 2.0 Act of 2022. SECURE 2.0 requires employers with existing defined contribution plans to automatically enroll new employees in a retirement plan, with investments deducted from their paychecks, unless they affirmatively opt out of it. In addition, SECURE 2.0 increases the age for the required beginning date (RBD) for RMDs from retirement plans from 72 to 73 starting on January 1, 2023, for individuals who reach age 72 after December 31, 2022. The RBD will be increased to age 75 starting January 1, 2033, for individuals who reach age 74 after December 31, 2032. These changes provide an opportunity for you to help clients who will reach 72 in 2023 or later to update their retirement planning to maximize tax-deferred growth of their retirement accounts. The original SECURE Act, passed in late 2019, increased the age at which individuals must begin taking required minimum distributions from 70 ½ to 72 starting in 2020. 

SECURE 2.0 also allows a surviving spouse to elect to be treated as the deceased employee for purposes of the RMD rules, effective for calendar years after December 31, 2023. As a result, you can alert surviving spouses whose deceased spouses were younger than them to consider making the election to delay the date at which RMDs must begin, allowing additional time for tax-deferred growth of their retirement accounts.

In addition, SECURE 2.0 increases the amount of tax-advantaged contributions older workers can make as they approach retirement age and expands opportunities for retirement savings for longer term part-time workers. You can enable your clients to maximize the growth of their retirement accounts by alerting them to these new opportunities.

The retirement planning landscape has been evolving over the past several years and we are committed to keeping you up to date on the latest developments and how they will impact your clients’ estate plans.

The Deceased Spouse’s Unused Exemption Amount: a Spouse’s Final Gift

Spouses often work together to build wealth for themselves and their children. Congress recognized this by enacting the gift and estate tax portability election as part of the 2010 Taxpayer Relief, Unemployment Insurance Reauthorization, and Job Creation Act and making it permanent in the American Taxpayer Relief of 2012, providing married couples with a relatively simple way to potentially shield much more of their wealth from federal gift and estate taxation. You are familiar with your clients’ accounts and property, and your advice is essential to help your married clients decide if they should take advantage of the portability election.

What Is Portability of the DSUE?

In 2023, the federal estate tax exclusion amount is $12.92 million for individuals and $25.84 million for married couples, and only gross estates that exceed these amounts are subject to estate tax. Due to the unlimited marital deduction, married couples with large estates are usually able to avoid estate taxes at the death of the first spouse. However, at the death of the surviving spouse, their estate, including the amount that they inherited from their spouse, will be subject to estate taxes if the gross estate of the second spouse to die exceeds the estate tax exclusion amount. Prior to the enactment of the portability election in 2010, in the absence of complex planning, for example, forming a credit shelter trust with the deceased’s accounts and property equal to their remaining lifetime exclusion amount, the unused exclusion amount of the first spouse to die was lost, meaning that the couple’s children would inherit less of the couple’s wealth at the second death because only the second to die’s remaining lifetime exclusion amount  was available to reduce the estate tax that had to be paid. The portability election allows the surviving spouse to add the deceased spouse’s unused exclusion (DSUE) amount to their own exclusion amount to reduce or eliminate estate tax liability when they die.

What Is the Process for Electing Portability?

To take advantage of portability of the DSUE amount, after one spouse dies, the surviving spouse must file an estate tax return (Form 706) and make a portability election that allows the DSUE amount to be applied to the surviving spouse’s subsequent transfers during life or at death. Portability must be elected properly or it will be ineffective, so clients should be encouraged to seek the help of a tax professional. 

If the deceased spouse’s gross estate exceeds the basic exclusion amount, a federal estate tax return must be filed within nine months of the date of death (although a six-month extension is available). To take advantage of the DSUE amount, the executor of the deceased spouse’s estate must elect portability and compute the DSUE amount on the timely estate tax return. No extension of time to elect portability is available in this situation.

Even if the deceased spouse’s estate does not exceed the basic exclusion amount and the executor is not otherwise required to file an estate tax return, an estate tax return must be properly and timely filed to elect portability. Treas. Reg. § 20.2010-2(a)(1) provides that in such cases, the due date of an estate tax return required to elect portability is nine months after the decedent’s date of death or the last day of the period covered by an extension. 

In 2017, the IRS provided a simplified method for obtaining an extension of time to be used instead of the private letter ruling process that was available for a period extending to the second anniversary of the decedent’s date of death. In July 2022, the IRS issued Revenue Procedure 2022-32, which extends the time for estates that are not otherwise required to file an estate tax return under I.R.C. § 6018(a) to make a portability election under I.R.C. § 2010(c)(5)(A) from the second to the fifth anniversaryof the decedent’s date of death and allows a simplified method for obtaining the extension. Using the simplified method, an executor who wants to elect portability and has not yet filed an estate tax return—and was not required to do so under I.R.C. § 6018(a)—only needs to file a “complete and properly prepared” estate tax return (Form 706) that states at the top that it is “FILED PURSUANT TO REV. PROC. 2022-32 TO ELECT PORTABILITY UNDER § 2010(c)(5)(A).” The five-year deadline and simplified process make it easier and less expensive for the surviving spouse to take advantage of their deceased spouse’s unused exclusion amount, and in some cases, this could reduce or even eliminate federal estate taxes upon the death of the surviving spouse.

Why Should You Advise Clients to Elect Portability?

Although preparation of the estate tax return may seem like an unnecessary expense for clients whose estates are not currently subject to estate tax, keep in mind that the surviving spouse’s wealth could grow substantially before their death, and the DSUE amount could be used to shield wealth that otherwise would be subject to estate taxes. In addition, although the current estate tax exemption amount is historically high, it is scheduled to be reduced by half at the end of 2025, so in only a few years, many more estates will be subject to estate tax liability unless the law is changed. In addition, some states have their own estate or inheritance taxes applicable to estates of a much lower value. 

We Can Help

Portability is an important and valuable strategy to minimize your clients’ estate taxes. Please contact us if we can help your clients to determine if they should take advantage of a portability election, especially in light of the sunset of the doubled gift and estate tax exemption amount at the end of 2025.

Spring Break Checklist

After a long, cold winter, many of us—from the young and to the more mature—are ready to make plans for spring break. As your clients’ trusted advisor, you can provide valuable reminders to clients who will travel to take advantage of warmer weather and those who will enjoy their spring break at home. 

Tips for Clients Who Are Traveling

1. If your clients are planning a spring break trip, remind them to gather important documents they may need during their travels:

  • Passport. If your clients plan to travel internationally, they will need a valid passport. If they need a new passport or to renew their existing passport, they should plan ahead: routine processing can take six to nine weeks, although expedited, urgent, and emergency processing is available under some circumstances.
  • Health insurance card. Clients should bring their health insurance card with them on their trip. If your clients are traveling within the United States, they should also contact their health insurance company to ask if the state they are visiting is within their plan’s network. If they are traveling to a state outside of their plan’s network, they should ask which services are covered. In general, routine care is not covered in states that are outside of a plan’s network, but emergency services are covered. However, plans may differ, so it is important for your clients to check with their insurance company. 
  • Powers of attorney. If your clients have property, accounts, or a business that need to be monitored or managed while they are away, they should make sure they have a financial power of attorney granting someone they trust the power to take care of their affairs until they return. In addition, clients should consider a power of attorney that authorizes someone they trust to handle emergencies while they are away, for example, repairs and insurance claims in the event of a flooded basement or a roof damaged by hail. The document can specify exactly what the individuals appointed under the power of attorney are authorized to do and the time period during which they may act on your clients’ behalf.
  • Auto insurance information. In general, auto insurance policies cover drivers in all fifty states and sometimes Canada and Mexico. In addition, if your clients have auto insurance, it will cover a rental car. However, there may be some gaps in coverage if their rental car is damaged or stolen. If they do not have auto insurance, they will need to obtain rental car insurance if they plan to use a rental car during their travels. Clients who are traveling abroad will likely need to obtain rental car insurance and an International Driving Permit, which is a document that translates the information on their driver’s license into at least ten languages.
  • Travel insurance. Your clients should also consider obtaining travel insurance, which can include trip cancellations, disruption insurance, or travel health insurance. If your client’s trip was expensive, they could lose a lot of money if they get sick and cannot travel or an incident occurs that prevents the trip from occurring as planned. In addition, if your clients are traveling internationally, their health insurance may only cover emergency care. Travel health insurance may cover out-of-pocket costs that are incurred for medical care. In addition, medical evacuation insurance is available to cover transportation expenses if clients travel to a country whose healthcare is not as good as the care they would receive if they return home or are transported to another location.

2. Remind your clients to make sure that their family members and loved ones have their contact information in case of emergency. Although your clients will likely have their cell phones with them during their travels, some areas, even in the United States, have poor cell phone coverage. As a result, they should provide landline telephone numbers and addresses of the hotels or resorts where they plan to stay during their trip.

3. If you need to be able to reach your clients to discuss important financial matters, make sure you obtain their itinerary and contact information as well. It may provide them peace of mind to know that you will be able to reach them in case an urgent matter arises.

Tips for Clients Who Are Staying Home

If your clients are taking a staycation, they can take advantage of their free time to review their existing financial and estate plans. If they have changed jobs, gotten married, had children, or experienced other life changes, it may be time for an update. If your clients need to update their estate plans, we are ready to help.

Important Dates to Be Aware of in 2023

The new year brings with it important dates that may impact your clients’ financial situations and tax deadlines they may need to meet. By providing them with the following information, you can help them plan ahead to avoid financial trouble and avoid penalties for nonpayment or late payment of taxes.

March 6, 2023, is the deadline under the sixty-five-day rule for trust distributions. Under Internal Revenue Code (I.R.C.) § 663(b), distributions made to beneficiaries of nongrantor trusts (and estates) made within sixty-five days of the end of 2022 may be counted as distributions made during 2022. This could be an important tax savings opportunity for your clients, as a nongrantor trust must pay income tax at the trust level on any taxable income it retains. For 2022, a trust is taxed at the maximum rate of 39.6 percent when its taxable income exceeds $13,451, in contrast to individuals, who reach the top tax rate of 37 percent when their income exceeds $539,900. In some cases, the Medicare surtax (net investment income tax) may also apply, meaning that the trust will have an even higher marginal tax rate. As a result, the overall tax savings may be significant when distributions of trust income are made to a beneficiary in a lower tax bracket. An election to treat the distribution as being made in 2022 must be made by the trustee on a timely filed income tax return for the trust.

April 18, 2023, is the deadline for 2022 individual retirement account (IRA) contributions. Encourage clients who are still working to review their 2022 IRA contributions so they can take full advantage of tax-free or tax-deferred growth, as they are permitted to make contributions for 2022 until April 18, 2023. Due to the high rate of inflation, the limits on contributions to traditional and Roth IRAs will increase from $6,000 in 2022 to $6,500 in 2023. Individuals who are fifty years old or over are permitted to contribute an additional catch-up contribution of $1,000 (unchanged from 2022). In addition, remind older clients to take their required minimum distributions: under the SECURE Act, those who reached age seventy and a half in 2020 or later must take their first required minimum distribution by April 1 of the year after they reach age seventy-two.

April 18, 2023, is tax day. Now that a new year has started, remind your clients to gather the paperwork they need to prepare for filing their income tax returns: W-2s, Forms 1099, records of income from other sources, records of IRA contributions, health savings account contributions, and other items that can reduce their taxable income, as well as documentation that will allow them to take advantage of tax deductions or credits, such as charitable contributions and mortgage interest.

Student loan repayments resume sometime in 2023. To provide relief to students holding eligible federal student loans during the COVID-19 pandemic, the 2020 CARES Act required the US Department of Education to pause loan payments, implement a zero percent interest rate, and stop collection on defaulted loans starting March 13, 2020. The relief was extended by subsequent legislation and administrative forbearance, and in November 2022, the Department of Education instituted another extension of the pause on repayments while Biden’s student loan forgiveness plan is being litigated in the courts. However, in the absence of another extension, the pause on repayments is currently set to end sixty days after the litigation is resolved or sixty days after June 30, 2023, whichever happens first, amid a period of record high inflation. If your clients are among the millions who owe a substantial amount on their student loans, help them create a plan that will enable them to resume payments by helping them determine how much they owe, the size of their payments, how it will affect their budget, and if debt consolidation could be helpful. 

Although the Biden Administration’s plan to forgive up to $10,000 in eligible federal student loan debt for non-Pell Grant recipients and up to $20,000 for Pell Grant recipients was recently struck down by several courts as unconstitutional, if the plan is eventually implemented, be sure to advise your clients that the amount forgiven may be taxable. Although the Internal Revenue Service has indicated that the amount forgiven will not be taxable income at the federal level, it will be taxable in some states.

Your role in helping your clients assess their financial and tax situation and advising them appropriately is critical. If we can help your clients further secure their financial future by creating or updating their estate plan, please give us a call.

New Business Succession Strategy: The Purpose Trust

The beginning of a new year is when many of us reflect on where we have been and what we would like to accomplish in the future. However, business owners are often tempted to succumb to the tyranny of the urgent and fail to take time to consider the future of their businesses. You can provide a great service to your business-owning clients by encouraging them to think about what they would like their life’s work to accomplish in the future. Those who would like to help make the world a better place for future generations should consider a relatively new and perhaps unfamiliar planning tool: the purpose trust.

What Is a Purpose Trust?

A typical trust is an agreement involving several parties: the grantor, the trustee, and the beneficiary. After the trust is created, the grantor funds it with money or property, and the trustee is responsible for managing those assets as specified in the trust for the benefit of specific named beneficiaries. One exception recognized under the law is a charitable trust that is created for a charitable purpose but has no specific beneficiaries. In recent years, however, some states have enacted statutes that allow the establishment of noncharitable purpose trusts (generally known as purpose trusts). In some states, they can be established only to care for pets or maintain a grave site. However, other states (for example, Delaware, New Hampshire, South Dakota, Utah, and Wyoming) allow purpose trusts for most lawful purposes, as long as they are reasonable, attainable, and do not violate public policy. Because there are no beneficiaries to ensure that the trustee is carrying out the purpose of the trust, the grantor must designate an independent trust “enforcer” who can petition the court if the trustee fails to perform its duties under the trust. The same or a different party could also be appointed as a trust protector who can modify the trust if necessary, for example, to add beneficiaries if the purpose of the trust has ended, change the situs of the trust, or even terminate it. The goal of a purpose trust is different from that of more common estate planning tools in that it is not aimed primarily at minimizing taxes or transferring wealth efficiently (although it may achieve those goals) but instead at ensuring that the grantor’s stated purpose is carried out.

The Patagonia Purpose Trust

In September 2022, Yvon Chouinard, the founder of Patagonia, a $3 billion clothing company, transferred the voting stock of the company to a purpose trust designed to further his lifelong goal of fighting the environmental crisis. In a message from Chouinard on Patagonia’s website, he explained that his desire was for the company to continue to pursue its stated purpose: “We’re in business to save our home planet.” After learning that his children were not interested in running the business, he considered his options. Although he could have sold the company and donated the proceeds to other organizations that would continue to pursue the company’s goals, he worried that a new owner of Patagonia would have different values and that his employees would not have job security. The voting stock of the company was transferred to the Patagonia Purpose Trust, which, guided by the family and their advisors, will ensure that the company’s values are pursued and that its profits further their goals. All of the nonvoting stock was contributed to a 501(c)(4) nonprofit organization that will be funded by Patagonia’s dividends, worth an estimated $100 million a year, which it will use in its efforts to protect the environment. Because the business interests were not donated to a charity, the gift will be subject to an estimated $17.5 million in gift tax, and no charitable deduction will be available to Chouinard. However, he will avoid $700 million in capital gains taxes, and when he dies, Chouinard’s estate will avoid substantial estate tax liability.

Why Would a Client Want to Transfer Their Business to a Purpose Trust?

There are a number of reasons why clients who own profitable companies may be interested in a purpose trust as they consider business succession planning. Like the Chouinard family, they can ensure that in addition to providing job security for their employees, the values underlying their business continue to be pursued for many decades into the future. If they do not have children who are interested in running the business, or if their children do not share their values, they can use a purpose trust to require future management to adhere to the purposes set forth in the terms of the trust. Transferring the business to a purpose trust will also ensure that it remains a private company and that the pursuit of profits will never replace the owner’s cherished values as its main goal.

As your client’s financial advisor, you know them well and are aware of their goals for the future of their business and whether they have a desire to use the wealth they have acquired for the benefit of others. You can do a great service for civic-minded clients by informing them about the planning opportunity presented by a purpose trust. Give us a call if we can help you and your clients determine if this opportunity is one they would like to explore.


1 Yvon Chouinard, Earth Is Now Our Only Shareholder, Patagonia, (last visited Dec. 12, 2022).

2 David Gelles, Billionaire No More: Patagonia Founder Gives Away the Company, N.Y. Times (Sept. 14, 2022),

3 Patagonia Billionaire Ducks $700 Million Tax Hit by Giving It Up, Bloomberg L. (Sept. 16, 2022),

Will 2023 Be a Good Year for Your Clients?

Inflation Has Hit the Estate Planning World

The rate of inflation has reached a historic high, but it has also created estate planning opportunities that some of your clients may not have anticipated. Both the annual gift tax exclusion and the lifetime gift and estate tax exclusion amounts are adjusted for inflation each year, so when the rate of inflation is higher, the increases in these amounts are also greater. Now is a great time to remind your clients of the opportunity to take advantage of these tax-saving opportunities.

Annual Gift Tax Exclusion

Clients who are interested in making an outright gift to a loved one can take advantage of the annual gift tax exclusion, which was increased to $17,000 for 2023 (up from $16,000 in 2022), to make tax-free gifts of money or property up to the exclusion amount directly to as many loved ones (including nonfamily members) as they wish. Married couples can each give $17,000 per recipient; for example, they can provide tax-free gifts of $34,000 to each of their children. Annual exclusion gifts do not count against your clients’ lifetime estate and gift tax exemption amount, and the recipients will not owe any income or gift taxes on the amount they receive. Remind your clients that their gifts of money or property must be of a present interest, that is, they must transfer full title with no limitations to avoid disqualifying the gift from eligibility for the annual exclusion. Annual exclusion gifts are a use-it-or-lose-it opportunity each year and do not accumulate from year to year, so the gifts must be made by the end of 2023, or the chance to use the 2023 annual exclusion will be lost.

Lifetime Gift and Estate Tax Exclusion Amount

The basic exclusion amount for decedents dying in 2023 and the generation-skipping transfer tax exemption amount for 2023 is $12.92 million (up from $12.06 in 2022). The increase in the basic exclusion amount means that an individual will be able to transfer an additional $860,000 ($1.72 million for married couples) free of transfer tax liability in 2023. Gifts exceeding the annual exclusion amount will be counted against their lifetime exemption amount. These gifts are considered taxable gifts, but your clients can simply file a gift tax return and use part of their exemption amount as a credit, so they will not owe any gift tax unless the total value of all gifts made exceeds their remaining basic exclusion amount. The lifetime estate and gift tax exemption amount is set to be cut in half in 2026 in the absence of a change in the current law, so time is of the essence for clients who are interested in taking advantage of the current high exemption amount.

Remember the Anti-clawback Regulations

Under 2019 regulations issued by the Internal Revenue Service (IRS), a special rule was adopted allowing an estate to compute its estate tax credit using the greater of the basic exclusion amount (BEA) applicable during a taxpayer’s lifetime and the BEA applicable on the taxpayer’s date of death, ensuring that taxpayers will not be adversely impacted if they take advantage of the increased BEA by making lifetime gifts and then die in a year with a reduced BEA. The final regulations also clarified that the increased BEA is a use-or-lose benefit, available only to the extent that a taxpayer actually uses it by making gifts during the period in which the increased BEA amount is available. 

Proposed regulations released in April 2022 deny the benefit of the special anti-clawback rule to completed gifts that are treated as testamentary transfers for estate tax purposes and are included in the donor’s gross estate (includible gifts). The exception to the special rule, which requires the estate tax credit to be calculated using the BEA applicable on the taxpayer’s date of death (and thus a lower exemption amount after 2025), is likely to apply to grantor retained annuity trusts, qualified personal residence trusts, promissory note transactions, and possibly preferred partnership techniques. However, the anti-clawback rule would continue to apply to transfers includible in the donor’s gross estate where the taxable amount is 5 percent or less of the total amount of the transfer valued on the date of the transfer. The proposed regulations would also claw back gifts into a decedent’s estate made by the decedent less than eighteen months prior to the death of the decedent. 

We Can Help

No one is happy about the high rate of inflation, but you can help your clients turn lemons into lemonade by strategic gifting. Please contact us if we can help your clients determine if they should take advantage of the estate planning opportunities provided by the historic increases in the exclusion amounts, especially in light of the sunset of the doubled gift and estate tax exemption amount at the end of 2025.