SURVIVOR INCOME PLANNING

Significant tax savings are available through effective estate planning and implementation. However, it is easy to become bewildered by the complexity of the laws, regulations, calculations, legal agreements and strange terminology.

It is important that the primary objective be clearly stated:

To provide maximum security and income for current use as well as during retirement, in the event of a disability and for survivors when a death occurs.

Any planning technique that reduces costs and taxes will increase the funds available to earn interest. A simple guideline is that savings of $100,000 at the time of a husband’s death may generally produce more than $500 per month for the use of the widow, in addition to the $100,000 ultimately distributed to children.

INCOME FROM VARIOUS SOURCES

Survivor Income recommendations clearly indicate that all income from the increased estate will flow to the survivor. The use of two or three trusts can provide security and investment management in addition to achieving higher income as a result of savings in administrative costs and taxes.

LIQUIDITY TO PAY ESSENTIAL EXPENSES

It is essential in estate planning that there be sufficient liquid resources to handle all expenses of probate, debts owed directly by the deceased and debts which may also be called due to being a co-signer.

Many estates have a large value, but after all of the expenses, debts and forced liquidation to pay taxes, there are few remaining assets that will produce an income.

THE PLACE FOR LIFE INSURANCE

The purpose of life insurance is not to build an estate. It is far too conservative a form of property for that purpose. Life insurance is designed to buy the time necessary to accumulate property of significance. It also enables one to be more fully invested in properties with excellent growth potential, while allowing the life insurance to provide the estate liquidity in the event of premature death.

None of our estate analysis recommendations involve steps which reduce the survivor’s anticipated income.

WHEN TO CONSIDER GIFTING

This does not mean that you should not also consider the advisability of making gifts to family members or as charitable contributions.

Significant gifting programs (other than for education) are not advisable until the anticipated income for the surviving spouse is more than sufficient. If a widow finds actual income to be excessive, she can always activate sprinkling provisions that will then flow income to a child or children in a manner designed to reduce income taxes. She can also make outright gifts to family members or charities, and only when her future security is assured, make gifts of principal.

ONGOING MEDICAL INSURANCE NEEDS

One of the greatest threats to principal and continued income is the specter of large medical bills. For this reason, we recommend at least two layers of quality medical insurance.