Couple Must Update Estate Planning after Sale of Business

Article excerpt

Q. My wife and I recently sold our business. The sale netted us a good sum for retirement but it put the two of us into taxable estates as we now have more than two times the credit against estate tax. Long ago we set up living trusts, so we have that in place, but we're hunting for something else to help save on estate taxes. Do you think we should consider a separate trust for my life insurance? The policies are worth about $400,000.

A. You and your wife need to update all of your estate planning. W henever a major financial change occurs in your life, such as the sale of your business, you need to get your plan out and review it with your estate planning attorney and your accountant. It's best to do the review before a family business is sold, but better now than never.

I suggest you do at least three things to update your planning:

First, make sure that your current plan operates the way you and your wife want it to work. The plan needs to work from a tax perspective and the personal perspective.

For estate taxes, make sure that your living trust agreements provide the necessary language to make good use of the credit you each have against estate tax, called the "unified credit." If your trusts are old, they may need to be revised for tax planning as well as changes in the law since the time you created the trusts.

From the personal perspective, you need to be sure the trusts provide for your family's needs today.

Second, a special type of trust for your life insurance may be a good idea. …


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