Beware of Non-Specific Estate Planning Advice

Posted By: Manish C. Bhatia

> Estate tax and administration laws are state-specific, so articles and general advice must be taken with a grain of salt.

> A proper estate plan is based on your specific family and financial situations and tailored to achieve your goals.

> Nuances matter when comparing estate planning situations that appear similar on the surface.

Independent knowledge and trusted advisors are crucial to addressing your estate planning. However, it is important to distinguish between general information and your specific needs. Articles regarding estate planning are often written for national publications, but many estate tax and administration laws—including tax exemptions, probate thresholds and marital property laws—are state-specific. Additionally, estate planning advice, whether it comes from an adviser or at a cocktail party, should be taken with a grain of salt until your specific circumstances and goals are thoroughly considered and discussed with your estate planning attorney.

State-Specific Planning

​​Portability, which allows a surviving spouse to inherit a deceased spouse’s unused federal estate tax exemption and apply it against his or her own estate, was introduced into law in 2010 and made permanent in 2013. Since then, there have been many articles questioning the need for a bypass trust, also known as an A/B trust or credit-shelter trust.

While portability can be a valuable safety net, relying on this technique alone can have very expensive consequences, primarily because many states, including Illinois, do not offer portability for the state estate tax. Thus, while relying on portability as a planning tool may seem like an estate planning shortcut, it may short-change your loved ones by straddling them with a significant state estate tax bill. Consulting an estate planning attorney to advise you on your federal and state estate tax needs and offer solutions to minimize your state-specific tax and administration costs will ensure that your estate planning strategy is right for you and your family.

Second-Hand Advice

Another source of estate planning misinformation is second-hand advice. Each estate planning and administration situation is unique due to the number of variables involved, such as income and estate tax considerations, types and locations of assets, family circumstances and, most importantly, the client’s wishes.

Recently a client was told by a financial professional that in his parents’ estate plan, his mother served as sole trustee of his deceased father’s trust, so there is no need for the client and his spouse to have co-trustees named in their trusts. This is a very dangerous practice. The client called me and was ready to remove the co-trustee provision, until the purpose behind it was explained to him. Without knowing all of the details of the parents’ estate plan, it would have been irresponsible of me to guess why their trusts did not have co-trustees named.

The nature of estate planning lends itself to dramatic stories and unexpected outcomes. Two seemingly similar scenarios can have very different outcomes based on a few words in the document or the titling of an asset. Your family, financial and tax situation is likely very different from the person telling you about a family member’s estate or a situation designed to give general advice. It is important to work with an estate planning attorney who will analyze your specific needs and goals and advise you accordingly.

Best Practice

Like all legal advice, it is important to be wary of general information or second-hand advice. Just as form documents are unlikely to serve your estate planning needs and achieve your goals, it is dangerous to apply advice that is not specific to your family and financial situations. Proper advice can only come from someone who understands your family and financial situations and can explain the purpose behind planning considerations and how they will apply to you and your family.