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Death & Taxes: Top Financial Experts Share Crucial Estate Planning Mistakes to Avoid

Posted by Maria N. Jonsson | Apr 27, 2018 | 0 Comments

When planning for the future, many people forget an essential step in the process. When one dies, many factors come into play immediately. Take care to make good decisions in estate planning so heirs are not left stressed and in trouble. These decisions can have long-lasting effects and should involve all of your key advisors. Here is advice from three top financial experts on crucial mistakes to avoid.


“The most important piece of advice I can give to someone with respect to estate planning is to make sure that you include all your key financial advisors in the process and to update your estate plan regularly. For example, if the income tax return preparer is not included in the estate planning process, he or she may not be aware of all the gifts. As a result, the preparer may fail to update the names on pass-through entity k-1s to reflect entity ownership changes due to a gift or may fail to file gift tax returns to report gifts made in conjunction with an estate plan. Failing to file a gift tax return can be particularly detrimental in that filing a gift tax return starts the running of the statute of limitations. Once the statute of limitations has run, the IRS can't challenge the reported gift unless fraud was involved. Failing to file a gift tax return means that there is no statute of limitations and the gift can be challenged at any time. This can be particularly important where gifts have been valued using aggressive discounts and valuation methodologies. A good estate plan should be updated to fully take advantage of changes in the tax law and to reflect changes in a person's personal situation.”


“Clients often focus on building the business and that is to be applauded. However, it is also critical that there be adequate planning for the ultimate distribution of the wealth that has been accumulated in the process. There are various planning tools available such as a living trust, irrevocable generation-skipping trusts, a pour-over will, etc. Proper estate planning provides an effective vehicle for the distribution of wealth to the intended beneficiaries, effectively and efficiently. Otherwise, the distribution is governed by a generic government probate formula. By having an estate plan in place at death, the assets can pass to the beneficiaries efficiently and thereby avoid expensive, lengthy and public proceedings in probate courts. A Client with a foresight to take estate planning seriously, set up a Grantor Retained Annuity Trust [GRAT} when the value of his company was still very low and thus avoided paying any gift tax on the transfer. Five years later when the GRAT period expired the assets went into an irrevocable trust for his children. Twenty years when the company was sold for hundreds of millions of dollars, one-half of the value had already passed to the children and thereby saved potential estate tax of 40% on that one-half of the net proceeds plus future appreciation. Quite a saving! That is the beauty of advanced estate planning. Time is a critical factor in such planning. With enough time, a lot of value can be transferred to beneficiaries tax free. At 40% tax rate, that is a substantial savings. ”

TES MACARAYA works with her business clients from its formation to its sale and anything in between. Learn more at


“I always tell my clients to check with me before they enter into any type of transaction. You don't know how many times people will close on a transaction and then will ask their CPA “What do you think?” At that point, it is too late because once the transaction has been completed there is very little that can be done. A great example of this is when a client called me to say that her mother was very ill this past year and that she sold her mom's home about 30 days prior to her passing away. The sale of the home and the gain on the sale had to be reported on her mother's final tax return. Since the home was purchased back in the 1950's, there was a substantial gain on the sale. If my client had contacted me before the sale, I could have explained that waiting to sell the home until after her mother passed would have given her a step-up in basis, resulting in no gain on the sale and, therefore, no income taxes. In other words, had she delayed selling, the home would have been marked-to-market at current values, rather than being set at the original purchase price; thus, she would have avoided the substantial appreciation that accrued over the ensuing decades. The lesson here is to always check with your CPA before, not after, you enter into any type of transaction, because there are tax strategies that can be highly advantageous and potentially can save you a lot of money.”

ROB BABEK is Managing Partner of the Los Angeles Office of Marcum, LLP, and is in charge of the Los Angeles tax practice. He has more than 36 years of experience in public accounting with a B.S in Business Administration from the University of Southern California, and a Master in Business Taxation from Golden Gate University.

These tips highlight the importance of working with your expert financial advisors in planning for the future of your heirs. A big thank you to all the experts who shared their insight and experience for this article. Share this article with people who you think could take advantage of this advice.

If you are looking for estate planning services, learn more from The Law Offices of Maria N. Jonsson, Trusts & Estates.

About the Author

Maria N. Jonsson

Founding Attorney and a Certified Specialist in Estate Planning, Trust & Probate Law by the State Bar of California Board of Legal Specialization


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Attorney Maria N. Jonsson, Esq. is a Certified Specialist in Estate Planning, Trust & Probate Law by the State Bar of California Board of Legal Specialization. The Law Offices of Maria N. Jonsson, PC is committed to providing a comprehensive and holistic analysis of your specific circumstances as they relate to Estate Planning, Probate and Trust Administration issues in California. Schedule a one-on-one discussion of your case with Attorney Jonsson directly.