Splitting Benefits and Costs – Unintended Consequences | Estate Plan Pros
Giving money to one beneficiary and the bill to another

Blended families face unique challenges that often involve designating particular assets to go to a surviving spouse, and other assets to children.  The trap for the unwary is that estate expenses are usually paid from the residuary beneficiaries.  What that meant for Tom Clancy’s children is that their step-mother got the bulk of the estate, but they got the estate tax bill. 

As reported in the WSJ and wealthmanagement.com, last Friday (Aug 21, 2015) Baltimore Judge Lewyn Scott Garrett ruled that Mr. Clancy’s widow didn’t owe any estate taxes on the $86 million estate.  This means that the tax bill for her share (roughly $57.5 million) will be paid by the other beneficiaries – Mr. Clancy’s other children.  While it appears that this was Mr. Clancy’s intent, this result may come as a surprise to others in similar situations.

Most of us won’t have to deal with large estate tax bills, but there are plenty of other expenses relating to an estate – the final tax return, expenses with the upkeep of the estate, etc.  When creating a plan that splits the estate it is important to consider not only who gets what, but also who will pay the estate’s expenses.

Image courtesy of nuchylee at FreeDigitalPhotos.net

Tags:Blended Family

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Erik Hartstrom

Erik is the founder of Estate Plan Pros, a leading estate planning practice in Elk Grove.  Erik’s practice focuses on Estate Planning Law. In Estate Planning, Erik works with clients to make the process simple, so clients can focus on more important things. He is a local authority for specialized estate planning instruments, like Special Needs Trust, Irrevocable Trusts, or other focused documents. Erik has litigated, negotiated, and mediated the gamut of family law cases. With this unique perspective as a family law and estate attorney he can often spot issues otherwise overlooked. Prior to graduating he worked as a legislative analyst for a non-profit organization, and volunteered as a youth counselor. Erik currently participates in local politics and is an active member of his local church. Erik is very happily married and has two young sons. Together, his family loves to get outdoors and enjoy the varied activities the Sacramento region has to offer.

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