When executing an estate plan it is important to have a team of talented professionals that can help advise you. An estate planning attorney is an expert on the law and can actually prepare the appropriate documents. However, having an accountant on your team that can advise you on tax and other financial issues is equally essential. Yes, they can be overly excited about math sometimes (we all have faults), but accountants do have an eye for detail that comes in handy when designing and executing your estate plan. Here are some ways that they can help with estate matters:
Accountants are masters at spotting tax issues. If you have estate or inheritance tax concerns then an accountant should be consulted along with your estate planning attorney. Accountants can help craft plans that help minimize or completely avoid these taxes.
Additionally, if you are dealing with the death of a family member, a final income tax return of the deceased person will likely need to be filed. If that person was married and had significant assets, then it might be a good idea to have the accountant file for portability with the IRS. Portability preserves the deceased spouse’s lifetime tax exemption for the surviving spouse under the tax code thereby doubling their overall exemption. An accountant can help prepare these types of returns for you.
Business Succession Planning
If you are a small business owner, it’s a good idea to have a business succession plan. By having a plan, you determine whether you want the business to be closed, sold, or your interest given to family members at your death. Accountants work with estate and business attorneys to help design a plan that suit your needs and minimize tax issues. Accountants are also experts in determining the value of your business. Knowing this value is critical if you ever decide to sell your interests during your life.
The rules surrounding 401(k) accounts and IRA distributions are complicated, especially when the account owner passes away. For example, should you disperse the assets of a traditional IRA to the beneficiary or allow those assets to be moved into an inherited IRA? Accountants can help guide you through the best way to manage these policies to maximize savings and minimize taxation.
If you are considering making significant gifts to anyone other than your spouse, you will likely need to file a gift tax return. This form lets the IRS know that you are making a taxable gift but want to make it tax free by using some of your lifetime exemption. An accountant can help prepare this form and file it with the IRS.
Also, if you are considering making charitable gifts as part of your estate plan, there are many ways you can donate. You could make these gifts to charity outright at your death, create charitable annuities which provide you a lifetime benefit, or use certain trusts which provide tax benefits for beneficiaries. These matters can be complex but accountants can assist your estate planning lawyer as to the most financially advantageous way of making these gifts when you are forming your plan.
Trust administration can be daunting, especially at tax time. Most irrevocable trusts will need to file an income tax return on any income earned by the trust each year. A qualified accountant can help advise trustees on financial matters concerning the trusts as well as preparing these required trust tax returns.
Additionally, if you are struggling to think of someone to serve as trustee for a trust you are creating, accountants can be a viable choice. They are naturally equipped to deal with numbers and generally make good financial decisions. However, many accountants may balk at serving due to the potential conflict of interest of serving both as an advisor and fiduciary. Moreover, serving as trustee is not without liability and many accountants may be reluctant to take on such responsibility. Speak with your accountant personally if you are considering seeking their appointment as trustee.