Estate Administration

Most people do not realize that there is such a thing as post-mortem tax planning. The feeling is that once a person dies, there is no longer a need for planning. This is not the case at all.

The administration of an individual's estate may involve some very complex issues, taxation and administration concerns, particularly when assets and/or beneficiaries are located in several jurisdictions.

We focus on post-mortem estate and income tax planning. This presents a valuable opportunity to fine-tune an estate plan prepared several years earlier to fit the economic and factual circumstances that existed at the time. Significant taxes can be saved by the timely exercise of a variety of tax and wealth transferring strategies, such as: knowing when, where and how to distribute estate assets can result in minimal estate shrinkage by minimizing taxes.

Understanding tax elections is crucial when it comes to administering estates effectively. These elections are available after death and exercisable within restricted time periods and by certain prescribed methods that must be followed carefully.

REMEMBER: The attorney who drew the will and related estate planning documents does not necessarily have to be hired to handle the administration of the estate - even if there are instructions that say to do so. As Executor you are generally entitled to select your own advisory team.

Popular belief is that the post-mortem planning process begins at death and ends when all debts and taxes have been paid and the estate is closed and distributed. This is a myth. The method by which an estate is administered does have down the road consequences.  Doing nothing and abiding by the estate document when there are other options available can land a fiduciary in hot water. Below is a diagram of our method of administering estates followed by a description of the post-mortem strategy we employ.

Our post-mortem planning philosophy 

Our philosophy is to treat every Estate matter like a Business. We plan and model the unique charateristics of each estate into a Business Plan using the process in the above diagram.

Our objective is to focus on minimizing the cost to the estate in achieving the decedent's goals and objectives   

When we are tasked to build a plan for the administration of an estate we consider the post-mortem estate documents as the starting point. We thoroughly examine the decedents estate documents and the nature and extent of the decedents assets, obligations and disposition instructions. If there is a surviving spouse the post-mortem plan could continue for years with certain out year tax consequences which need to be incorporated into the post-mortem plan. Additionally future distributions may be subjected to the Generation Skipping Transfer (GST) tax. While the estate documents generally control, there are certain post-mortem elections available to the executor such as the Marital Deduction and Qualified Disclaimers  that can be used to modify the estate plan to lower future tax liability.

Our methodology

In order to measure the effectiveness of our post-mortem planning process we prepare a baseline financial model. The baseline model is an out year projection of net heir values without considering post-mortem elections. We then build what-if models based on available elections under various sell/hold criteria and project out-year net heir values. With these supporting models the executor/fiduciary can make rational informed decisions as to post-mortem election planning given certain assumptions. These models analyze the decedent's final estate tax liability and project future tax liabilities, liquidity and out year net heir values. 

Please contact us using the form below if you need assistance in implementing a post-mortem Estate/Trust Administration Plan